Annual Report
and Financial
Statements
2024
STRATEGIC REPORT
03
Statement of Executive Chair
05
Finance Director’s Report
06
Key Performance Indicators
06
Principal Risks
10
Viability Statement
11
Section 172 Statement
13
Non-Financial and Sustainability
Information Statement
GOVERNANCE
23
Report of the Directors
25
Corporate Governance Report
26
Report of the Remuneration Committee
27
Report of the Audit Committee
28
Report of the Nomination Committee
29
Directors’ Responsibilities
30
Independent Auditor’s Report
FINANCIAL STATEMENTS
41
Consolidated Income Statement
42
Consolidated Statement
of Comprehensive Income
43
Consolidated Statement of Changes in Shareholders’ Equity
44
Company Statement of Changes
in Shareholders’ Equity
45
Consolidated and Company Balance Sheet
47
Consolidated and Company Statement
of Cash Flows
49
Notes to the Financial Statements
01
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Statement of Executive Chair
Science Group plc is an international science & technology
consultancy and systems organisation. In 2024, Science Group
again demonstrated the resilience of its operating model and, in
an unpredictable economic and political environment, the Group
has delivered another year of record profitability.
In early 2025, the Group’s robust balance sheet, accumulated cash
resources and strong operating cash flow enabled Science Group
to make an investment in Ricardo plc (‘Ricardo’), a UK-based,
science and technology consultancy and engineering business.
Science Group is now the second largest shareholder in Ricardo.
Financial Summary
For the year ended 31 December 2024, Science Group reported
adjusted operating profit of £21.5 million (2023: £20.5 million)
and an adjusted basic earnings per share increase of 9% to
36.2 pence (2023: 33.3 pence). Revenue was marginally down
at £110.7 million (2023: £113.3 million) reflecting (i) market
conditions; (ii) a strong comparator in some consultancy areas;
and (iii) the managed transition away from some legacy, low
margin activities in the Defence sector. The Group’s reported
statutory operating profit was £14.9 million for the year
(2023: £8.1 million) and profit before tax was £14.7 million
(2023: £7.6 million, which was impacted by one-off, non-cash
adjustments associated with the TP Group acquisition). Cash
generated from operations was £21.8 million in the year, reflecting
the Group’s consistent focus on cash conversion.
Science Group retains a strong balance sheet. Despite returning
£8.6 million to shareholders through share buy-backs (£5.0 million,
2023: £3.9 million) and an increased dividend payment outflow
of £3.7 million (2023: £2.3 million), at 31 December 2024 Group
cash was £38.6 million (2023: £30.9 million) and net funds were
£26.8 million (2023: £18.0 million).
At 19 March 2025, adjusting for the cost of the Ricardo share
purchases (including brokerage fees), Science Group retained
gross cash of approximately £25.7 million and net funds of
approximately £13.8 million. At the same date, the market value
of the Ricardo investment was £25.6 million. Therefore, not only
has the Ricardo shareholding produced a paper profit (in March
2025) since investment, but Science Group retains significant cash
resources, enhanced by a new unused debt facility.
Consultancy Services
The Consultancy Division is an international services business
providing advisory, product development, regulatory and
project management services. The Division is characterised by
deep technical and scientific expertise combined with specialist
industry-sector knowledge.
The collaboration between the different practices that make up
the Division has progressively developed such that the Board
is now unifying the operations under the Sagentia brand. The
finance function across the Division has been fully integrated and
is migrating to a consistent Finance IT platform, anticipated to be
completed in summer 2025, enabling the business to maintain its
high productivity and efficiency of operations.
Reflecting the more challenging consultancy market in 2024,
a strong prior year comparator in the Medical sector and
management action to reduce some legacy, low margin activities
in the TP Group Defence services business, for the year ended
31 December 2024, the Consultancy Division generated revenue
of £72.2 million (2023: £81.3 million), producing an adjusted
operating profit of £17.9 million (2023: £20.4 million). The Division
margin has been maintained at 24.9%, broadly the same as
in 2023. The outlook for the year ahead reflects the ongoing
refocusing to higher value-add activities in the Defence sector
being broadly offset by growth in other sectors.
Systems Businesses
The Group has two systems businesses, both of which have
leading positions in their specialist markets. These businesses
operate independently but are supported by the Group’s
corporate and shared services infrastructure and leverage the
Consultancy Division’s science, technology and engineering
capabilities. In aggregate, for the year ended 31 December 2024,
the Systems businesses reported significantly increased revenue
of £37.8 million (2023: £31.2 million) and an adjusted operating
profit of £5.8 million (2023: £2.2 million).
CMS2 (Critical Maritime Systems & Support) designs, develops,
manufactures and supports atmosphere management systems
for submarines. The business services an international client
base, but the UK Defence market accounts for around 70% of the
revenue.
Management action in the last two years has transformed the
business, with revenue growing to £25.9 million, including
around £5.6 million of low-margin pass-through materials,
(2023: £21.3 million, 11 months, including £3.4 million of
low margin revenue). Adjusted operating profit increased to
£5.7 million (2023: £3.6 million, 11 months). Revenue and profit in
2024 benefitted from prior years chargeable rate reconciliation,
a standard retrospective process in the UK Defence sector. The
Board anticipates that the business will continue to progress in
2025 and continues to invest in next generation systems and
technologies.
Frontier is a market leading supplier of DAB/DAB+/Smart Radio
chips and modules. Whilst the consumer electronics market has
started to recover from the post-pandemic trough, it remains
subdued in the weak UK and European economic environment.
Revenue increased to £12.0 million (2023: £10.0 million)
and the business returned to break-even, despite significant
investment in new product development activities, all of which
was expensed in the year with no capitalisation of R&D. Further
business simplification and cost reduction was undertaken with
the transitioning of the internet radio service infrastructure to a
third party partner. The Board anticipates the Frontier recovery to
continue in 2025.
Corporate
The corporate function is responsible for the strategic
development and governance of the Group, ensuring alignment
of business operations with Science Group shareholders. The
underlying costs of the corporate function were £2.9 million (2023:
£2.6 million) due to increased corporate activity in the year.
During 2024, the Company repurchased 1,080,507 shares at a
total cost of £5.0 million (2023: £3.9 million), equivalent to an
average price of 459.0 pence per share. At 31 December 2024,
shares in issue (excluding treasury shares held of 1.4 million)
were 44.7 million (2023: 45.5 million excluding treasury shares
held of 0.7 million). The Board anticipates continuing the buy-
back programme in 2025, with an increased capital allocation of
over £6.0 million and is recommending maintaining the dividend
at 8.0 pence per share (2023: 8.0 pence per share), reflecting
capital allocation preference in shareholder feedback. Subject to
shareholder approval at the Annual General Meeting (‘AGM’), the
dividend will be payable on 4 July 2025 to shareholders on the
register at the close of business on 23 May 2025.
Science Group owns two UK freehold properties, Harston Mill,
near Cambridge, and Great Burgh, near Epsom, the primary
function of which is to host the Group’s operating businesses.
The Group charges market rents to the operating businesses and
lets out part of the Harston Mill site to third parties. For the year
ended 31 December 2024, the rental and associated services
income derived from this activity was £3.9 million (2023: £4.2
million), with £0.6 million (2023: £0.8 million) generated from third
party tenants. Intra-group rental charges are eliminated on Group
consolidation. The last independent valuation of the freehold
03
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
02 Annual Report and Financial Statements 2024
STRATEGIC REPORT
03
Statement of Executive Chair
05
Finance Director’s Report
06
Key Performance Indicators
06
Principal Opportunities and Risks
10
Viability Statement
11
Section 172 Statement
13
Non-Financial and Sustainability Information Statement
Annual Report and Financial Statements 2024
Finance Director’s Report
Overview of Results
In the year ended 31 December 2024, the Group generated
revenue of £110.7 million (2023: £113.3 million). Revenue
from the Consultancy Services Division, that is revenue
derived from consultancy services and materials recharged on
projects, was £72.2 million (2023: £81.3 million) while Systems
revenue generated by the CMS2 Business was £25.9 million
(2023: £21.3 million) and Systems revenue generated by the
Frontier Business was £12.0 million (2023: £10.0 million). External
revenue generated by freehold properties, comprising property
and associated services income derived from space let to
third parties in the Harston Mill facility, was £0.6 million (2023:
£0.8 million).
Adjusted operating profit for the Group increased to
£21.5 million (2023: £20.5 million). The Group’s statutory
operating profit of £14.9 million (2023: £8.1 million) reflects
the amortisation of acquisition-related intangible assets of
£4.4 million (2023: £4.9 million) and share-based payment
charges of £2.3 million (2023: £2.0 million). Statutory operating
profit increased relative to 2023 because of the increase in the
underlying profitability of the Group, but additionally 2023 was
impacted by one-off acquisition related adjustments relating
to TP Group totalling £5.5 million. After net finance costs of
£0.1 million (2023: £0.5 million) and a tax charge of £2.7 million
(2023: £2.1 million), statutory profit after tax was £12.0 million
(2023: £5.5 million). Statutory basic earnings per share was
26.5 pence (2023: 12.1 pence per share).
Adjusted operating profit is an alternative profit measure that is
calculated as operating profit excluding acquisition integration
costs, amortisation of acquisition related intangible assets, share-
based payment charges, and other specified items that meet
the criteria to be adjusted. Refer to the Notes to the Financial
Statements for further information on this and other alternative
performance measures.
Foreign Exchange
The acquisition of TP Group, where revenue is denominated
in Sterling, has reduced the percentage of the Group’s overall
exposure to foreign exchange, however there remains a
reasonable proportion of the Group’s revenue denominated in
currencies other than Sterling. In 2024, £32.8 million (equivalent
to 30%) of the Group’s operating business revenue was
denominated in US Dollars (2023: £34.6 million), including all of
Frontier’s revenue. In addition, £1.8 million of the Group operating
business revenue was denominated in Euros (2023: £3.9 million).
The average exchange rates during 2024 were 1.28 for US Dollars
and 1.18 for Euros (2023: 1.24 and 1.15 respectively).
As in 2023, to provide greater forward visibility of foreign
exchange movements, the Group acquired a currency exchange
instrument to cap the Sterling:US Dollar rate in relation to certain
Consultancy Division cash flows through to the end of 2024. The
instrument applied to $1.0 million per month at an exchange rate
of $1.25/£1, whilst still allowing the business to benefit from lower
spot exchange rates when appropriate. A similar instrument has
been put in place until the end of 2025 for $1.0 million per month
at an exchange rate of $1.275/£1.
Taxation
The tax charge for the year was £2.7 million (2023: £2.1 million).
The increase is reflective of the higher profitability, offset by the
utilisation of tax losses and Research and Development (‘R&D’) tax
credits.
At 31 December 2024, the Group had £21.4 million (2023:
£29.3 million) of tax losses, the largest component of which
(£16.8 million) related to Frontier (2023: £19.2 million). Of the
Frontier losses, £7.0 million (2023: £9.1 million) have been
recognised as a deferred tax asset which is anticipated to be
used to offset future taxable profits. The balance has not been
recognised as a deferred tax asset due to the uncertainty in the
timing of utilisation of these losses. Aside from these amounts,
the Group has other tax losses of £4.6 million (2023: £4.2 million)
unrecognised as a deferred tax asset due to the low probability
that these losses will be utilised.
Financing and Cash
Cash from operations was strong at £21.8 million (2023:
£10.3 million). Cash flow from operating activities (excluding Client
Registration Funds) which takes interest payments and taxation
into account, was £17.5 million (2023: £8.9 million). Reported cash
from operating activities in accordance with IFRS was £18.5 million
(2023: £7.9 million). The difference in these two metrics relates
to the fact that one of the Group’s businesses, TSG, processes
regulatory registration payments on behalf of clients. The
alternative performance measure, by excluding Client Registration
Funds, reflects the Group’s available cash position and cash flow.
The Group cash balance (excluding Client Registration Funds)
at 31 December 2024 was £38.6 million (2023: £30.9 million)
and net funds were £26.8 million (2023: £18.0 million). Client
Registration Funds of £2.9 million (2023: £1.9 million) were held at
the year end.
Subsequent to the year end (in March 2025), the Group renewed
its bank borrowing facilities:
•
The 2016 Term Loan has been replaced with two new Term
Loans with a combined value of £12.0 million for a 10 year
period, secured solely on each of the Group’s freehold
properties. The interest margin of 2.6% is the same as the
2016 Loan. Interest rate swaps will fully hedge the two new
Loans resulting in a 10-year fixed effective interest rate of
approximately 7.3%, comprising the SONIA lending margin
plus the swap rate. In connection with repaying the 2016
Loan early, and settling the interest rate hedging associated
with that Loan, the Group will realise a one-off benefit, with
corresponding cash inflow, of approximately £0.6 million.
•
The 2021 Revolving Credit Facility (‘RCF’) has been replaced
with a new 5 year RCF of £30.0 million (with an additional
£10.0 million accordion option, subject to approval). The new
RCF is at a rate of 1.95% plus SONIA.
Working capital management continued to be a strong focus for
the Group with debtor days of 36 at 31 December 2024 (2023:
40 days) and inventory days of 76 (2023: 121 days).
Ricardo plc
In February and March 2025, the Group commenced purchasing
shares in Ricardo, incrementally increasing its holding to 16.2%
(as at 19 March 2025). These purchases were funded from the
Group’s existing cash resources.
Share Capital
At 31 December 2024, the Company had 44,738,465 ordinary
shares in issue (2023: 45,458,972) and the Company held an
additional 1,447,409 shares in treasury (2023: 726,902). The voting
rights in the Company at 31 December 2024 were 44,738,465
(2023: 45,458,972). In this report, all references to measures
relative to the number of shares in issue exclude shares held in
treasury unless explicitly stated to the contrary.
Jon Brett
Finance Director
Statement of Executive Chair continued
properties (December 2023) indicated an aggregate value in the
range of £16.9 million to £31.6 million, although for consistency
the properties are held on the balance sheet on a cost basis of
£20.8 million (2023: £21.0 million).
The Group’s Term Loan and Revolving Credit Facility (‘RCF’) were
scheduled to expire in 2026. In order to support the Group’s
corporate strategy, the Board undertook an early process to
refinance these facilities and in March 2025 confirmed:
•
Two new Term Loans with a combined value of £12.0 million
for a 10 year period, secured solely on the Group’s freehold
properties at the same margin as the previous (2016)
Loan, and
•
A new RCF on a 5 year term of £30.0 million (with an additional
£10.0 million accordion option, subject to approval) at a
significantly lower margin of 1.95% above SONIA.
Interest rate swaps will fully hedge the two Term Loans. In
connection with repaying the 2016 Loan early, the Group
will realise a one-off benefit, with corresponding cash inflow,
associated with the interest rate hedging on that loan of
approximately £0.6 million.
Investment in Ricardo plc
Ricardo is a UK-based science and technology consultancy
and engineering business with similar skills to Science Group,
operating in complementary markets. Science Group has been
monitoring Ricardo for some time with more intensive analysis
undertaken in the second half of 2024 and early 2025.
The Ricardo profit warning at the end of January 2025 was
anticipated and in mid-February Science Group commenced
acquiring shares in Ricardo. At 19 March 2025, Science Group is
the second largest shareholder in Ricardo with a holding of 10.1
million shares, equivalent to a 16.2% stake. This investment has
been acquired at an average cost (including brokerage fees) of
231.0 pence per share, around 15 year low share price levels. On
19 March 2025, the Ricardo share price closed at 254.0 pence per
share.
Science Group has had dialogue with the Ricardo Board in
relation to managing the investment. The Ricardo poor financial
performance, with weak cash conversion and a stretched balance
sheet, has led to a significant degradation of shareholder value in
this once great British company. The contrast to Science Group
and its record earnings per share, for similar consultancy and
systems businesses, is stark. A catalyst for change is required to
restore shareholder value in Ricardo and to address the ineffective
governance.
Science Group acquired its material stake in Ricardo in a
timely and effective manner. As a result, from a purely financial
perspective, down-side risk has been mitigated and a paper profit
(approximately £2.3 million) achieved at 19 March 2025. However,
as the second largest shareholder in Ricardo, a variety of options
to enhance and/or realise value from the investment, over a short,
medium or long time horizon, are open to Science Group and all
options will be evaluated.
Summary and Outlook
In summary, Science Group reports another solid performance in
2024, despite economic and political volatility, maintaining strong
margins with record adjusted earnings per share, the primary
metric for shareholder value. The Consultancy Services Division
was somewhat affected by the market instability, but this was
offset by the performance of CMS2 resulting from the successful
turnaround of that business. Accordingly, the Group’s strategy
again demonstrates resilience and translates into tangible results.
Most importantly, adjusted operating profit translates into cash.
Science Group’s strong balance sheet provides a robust
foundation for the Group while also enabling the Board to pursue
corporate opportunities in a timely manner, as evidenced by the
recent investment in Ricardo. Even after the Ricardo investment,
Science Group retains significant cash resources, enhanced by the
recent renewal and increase of finance facilities.
Similarly, while the Science Group share price has consistently
outperformed the relevant market indices, the Board remains
focused on translating operating performance into shareholder
value. Accordingly, the Board, anticipates allocating capital to
continuing and increasing the share buyback programme in the
year ahead.
Martyn Ratcliffe
Executive Chair
05
04 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC REPORT
Operational risks continued
Mitigation
Consultancy projects over-run or fail to meet technical milestones
Consultancy projects may over-run and/or may fail to meet
technical milestones because the nature of the work undertaken
by the Consultancy Division is technically challenging. Project over-
runs may lead to loss of margin on projects and overall profitability.
The Group contracts the majority of consultancy projects on a time
and materials basis. The risks of project failures are mitigated by the
Group’s internal project management processes including formal
bid review processes, regular reviews to assess whether the revenue
recognised on work in progress is a fair representation of actual costs
incurred and estimated costs to completion, regular formal project
board review meetings for large projects, and customer meetings to
review progress.
Key personnel
The Group relies on recruiting and retaining highly qualified
technical experts on whom the Group depends to deliver its
services and products. Failure to recruit and retain key staff could
threaten the Group’s ability to deliver projects to its customers, to
win new work or to maintain market competitiveness.
The Group’s growth also places greater demands on the
Group’s management and infrastructure across a wider range of
geographical locations and markets. Failure to recruit and retain key
management and functional staff could increase the risks associated
with operational and financial controls, sales and marketing,
information technology and other functional support areas.
The Group encourages staff retention through both competitive
remuneration packages and a stimulating work environment. The
Group’s growth also provides career opportunities across the Group.
In addition to base salary, remuneration can include annual bonus
or profit share, pension contributions, health benefits, life assurance
and share option awards, and the remuneration components are
reviewed regularly.
Efforts are made to foster a vibrant, dynamic and supportive
environment for employees, offering diverse, technically challenging
work for large and small customers across a range of industries and
specialist market, science and technology areas.
Loss of a major customer
Loss of one of the Group’s large customers may impact the Group’s
revenue and/or profit.
The diversity of the Group’s businesses across market sectors and
geographies mitigates against the loss of a major customer.
Cyber security
Cyber security threats pose a risk to confidential or sensitive
data held in the normal course of business as well as business
interruption risk. A breach of cyber security could result in a loss of
data, damage to the Group’s reputation and breach of customer or
other contracts.
The Group enforces appropriate IT controls, continuously reviewing
the quality of its security shields and protocol, and implementing
regular cyber awareness training for all staff, test phishing campaigns
and penetration testing. Networks used by those Group businesses
operating in the defence industry hold ISO 27001 (Information
Security Management) and Cyber Essentials Plus certifications and
other accreditations.
Geopolitical considerations
The conflict in Ukraine and its impact on energy prices has resulted
in significant operational cost increases for the Group’s freehold
properties. While energy costs reduced to some extent in 2024,
they remain high and may increase again throughout 2025.
Global energy and fuel prices also impact materials costs,
employee remuneration and other costs, and the Group may not
be able to pass increases onto customers.
The Group monitors energy prices, fixing prices where appropriate
and seeking to reduce energy usage.
In addition to its engineering base near Cambridge, UK, the
Frontier business has an office in Shenzhen and also has
employees in Hong Kong. Political instability in Asia may affect local
employees and suppliers and therefore impact Frontier’s sales,
product development and manufacturing functions.
The Group seeks to mitigate the risk of interruption to its usual
business activity in Asia by ensuring that product knowledge,
documentation, systems and data are backed up and replicated in
the UK offices on a daily basis. Manufacturing of Frontier products is
outsourced and could be replicated in other locations.
Supply chain availability
The CMS2 and Frontier businesses rely on the supply of
components for the manufacture of their products. An inability to
source these components in sufficient quantities is a risk to these
businesses’ ability to fulfil customer orders. Component shortages
may also result in increased prices which may not be able to be
passed on to customers.
In the Frontier business, a reduction in consumer demand may
result in high levels of inventory which may not be fully utilised.
The Group proactively manages inventory levels and seeks to identify
alternative, cheaper suppliers of certain key components.
Key Performance Indicators
The key performance indicators (‘KPIs’) are revenue, operating
profit, cash flow and the alternative performance measures as
disclosed in Note 1 in the Notes to the Financial Statements.
Profitability of the business is managed primarily via the review of
revenue and adjusted operating profit. Working capital is reviewed
via measures of trade receivables and inventory. Performance
against KPIs is reported in the Finance Director’s Report.
Principal Risks
The Directors consider that the principal and emerging risks
facing the Group, including those that would threaten the
sustainability of its business model, its future performance,
solvency or liquidity, are as set out below.
The Group reviews, analyses and addresses the risks it faces
through the Board, Audit Committee, Executive management and
business management teams, and project and functional reviews.
The frequency of reviews depends on the nature of the risk and
may vary from weekly to annually. Project risks are generally
reviewed at least monthly.
The Group maintains a risk register which is reviewed by the
Board in full at least once a year. The Board also regularly reviews
key existing and emerging risks across the Group on a monthly
basis. The Board considers this monthly period to be appropriate
for the business as it allows the Board to remain informed of
developments that may affect the delivery of its strategy and to
identify and implement any mitigating actions. It also supports the
Board’s review and revision of forecasting, undertaken on at least
a quarterly basis, to minimise the impact of any emerging risks to
the Group. A summary of the key measures taken to mitigate the
identified risks are set out below.
The Group uses internal and external methods to help identify
emerging business risks. Internally the Managing Directors
of the operating businesses report weekly to the Executive
management team on business performance and issues, and
provide formal reports to the full Board on a monthly basis. This
ensures that potential emerging risks identified on the ground are
escalated to the Board in a timely manner. Externally, the Group’s
professional advisors raise relevant potential issues from time to
time. Identified potential risks are discussed by the Board and,
if necessary, risk mitigation strategies are considered. Identified
risks may also be assigned to a working party to keep a watching
brief and update the Board as appropriate.
Operational risks
Mitigation
Economic conditions impacting demand for services
The Consultancy Division is dependent on the market for
outsourced science, technology, engineering, regulatory and
project management services. An economic downturn or instability
may cause customers to delay or cancel projects or to use internal
resources instead.
The current economic uncertainty and potential for recession in
the Western economies may impact both the total investment
and the investment priorities of the Group’s customers. In
particular R&D investment allocated to long-term initiatives may be
negatively impacted.
The Group seeks to diversify exposure across geographical markets,
increasing the number of market sectors in which it operates,
types of customers and range of service offerings. The Group also
undertakes marketing activities to inform current and prospective
customers regarding the benefits of outsourced services and Science
Group’s proven ability to fulfil those objectives.
The Group also seeks to exploit opportunities resulting from a
reduction in customers’ internal resources which may result in
greater levels of outsourcing for business critical projects.
Financial circumstances of customers
A deterioration in the global economic climate and/or financial
failure of customers or potential customers may adversely affect
the profitability of the Group, including by customers defaulting on
or delaying the payment of invoices.
The Group actively manages customer relationships including
credit limits which, if appropriate, may require payment in advance,
regularly reviews debtors and overdue payments, and has proactive
credit control procedures.
Reputational risk
Failure to deliver service or product deliverables to agreed
budgets, timetables and/or quality may result in reputational
damage to Science Group that may adversely affect future sales.
The Group operates Quality Assurance procedures, review meetings
with customers, formal customer feedback procedures, and holds
various quality certifications in the relevant businesses including
ISO 9001 (Quality Management Systems), ISO 13485 (Quality
Management Systems for Medical Devices), ISO 17025 (Testing
and Calibration Laboratories) and ISO 27001 (Information Security
Management).
In the Group’s systems businesses, testing is undertaken prior to
release of new products and remedial action taken in a timely manner
when faults are reported.
The Frontier business relies upon third party factories to
manufacture its product modules and upon its customers to
manufacture complete consumer products on behalf of end-
client consumer brands. Any deterioration in quality in these
manufacturing facilities may impact the Frontier brand and its
ability to sell product and/or maintain margin.
Frontier maintains long term relationships with trusted partner
factories and relationships with end-client consumer brands to obtain
product quality feedback.
07
06 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC REPORT
Strategic risks continued
Mitigation
UK defence policy
Businesses operating in the Defence and Aerospace industries,
in particular the TPG Services and CMS2 businesses, may be
impacted by changes in Government defence policies and
legislation. This may lead to a risk of delay to or loss of customer
contracts.
The Group seeks to develop long-term, close working relationships
with customers and to maintain current industry knowledge
providing visibility of future defence programmes and spend.
Technology advances
The ongoing development of new and existing technologies
provides opportunities for Science Group to provide market-
leading products and services to its customers. The Group’s
personnel must stay at the forefront of technical advances and
understanding of technical specialisms in order to exploit these
opportunities and sustain the Group’s growth.
Management teams regularly identify and review new technical areas
for investment, employees are encouraged to keep up to date on
technological developments by both formal and informal training
and self-learning in relevant areas of technical expertise, and where
appropriate recruitment is targeted at employees with new technical
skills where gaps in expertise are identified.
Generative AI
Generative AI technologies may have the potential to negatively
impact the provision of lower-value consultancy services by
delivering such services with a higher degree of automation.
The Group regularly evaluates potential Generative AI tools and use
cases to assess their potential use in both internal work and the
provision of high-value services to customers. The Group operates a
human-led approach to all work to maintain quality standards.
Financial risks
Mitigation
Inflationary pressures
Inflation in the global economy is a risk across the Group including:
•
increased costs from suppliers which may impact all
businesses.
•
increases in living costs including fuel, energy and food costs
which may impact employees.
•
wage inflation and associated pressure on salaries and
remuneration packages for both specialist skills in technology
and science as well as functional skills such as human
resources, marketing and finance.
The Group may or may not be able to pass on supply chain price
increases or higher employee costs to customers.
The Group proactively manages inflation where practicable. This
includes negotiating customer pricing or fee rate increases and
building inflationary cost increases into financial plans.
Currency exchange rates
A significant proportion of the Group’s revenues are invoiced in
currencies other than Pounds Sterling, including but not limited
to the US Dollar and Euro, whilst the majority of the Group’s
employee-based costs are incurred in Pounds Sterling. In addition,
materials related to Frontier products are typically priced in US
Dollars and end products are generally sold priced in US Dollars. As
a result, variations in currency exchange rates may have a material
impact, either positive and negative, on Group revenue and profit
performance.
In 2024 the Group procured two currency exchange instruments to
cap the Sterling:US Dollar rate for the R&D Consultancy business
until the end of 2025, having first procured similar instruments
in 2022 and 2023. These instruments provide the business with
improved visibility and reduced volatility. In addition, the Group seeks
to mitigate foreign currency exposure and volatility by transferring
excess foreign currency holdings into Pounds Sterling on a
regular basis.
Decrease in value of freehold properties
The Group owns two large freehold properties which may increase
or decrease in value. The Group’s bank facilities are secured on
these properties.
The Group maintains these properties on a long term basis primarily
for its own use. Maintenance is undertaken by dedicated on site
facilities teams and specialist external contractors. The properties are
also protected by appropriate insurance policies.
Operational risks continued
Mitigation
Market for radio products
The Frontier business has a high market share of the DAB radio
and counter-top smart radio markets and is therefore subject to
market demand and the competitive environment. These factors
are correspondingly affected by the economic climate, a reduction
in consumer spending and alternative methods of receiving radio/
audio programmes. This has been reflected in the challenging
conditions experienced across the consumer electronics sector in
2023 and 2024.
The market for consumer electronics goods is price sensitive.
Frontier’s products are manufactured in Shenzhen and local
conditions such as import tariff changes and shipping may also
impact the cost of radio production and therefore the selling
price to the end consumer, which may affect demand and/or the
margins of the business.
The Group actively monitors market developments, focussing on
operational efficiencies and adjusting material purchases. The Group
also has employees based in Asia to manage relationships with
customers and manufacturing locations. The switch off of FM services
in certain geographies may provide opportunities for increasing DAB
sales.
Litigation
All project contracts carry possible litigation risks including the
potential for product or professional liability claims, intellectual
property infringement claims and other warranty and indemnity
claims.
In particular the Consultancy Division has a significant exposure to
the US, where there is a higher propensity for litigation and where
the Group may also be required to respond to court orders relating
to disputes between third parties. Any litigation has the potential
for significant cost, management disruption and reputational
damage.
Contractual risks are mitigated through internal approvals processes,
the use of standard commercial terms where practicable or otherwise
negotiating appropriate contractual protections, and relevant
insurance policies.
Legislative or regulatory changes
Changes in legislation or regulation may result in increased costs
and/or interruptions to business processes. This may include
changes relating to health and safety, environmental, privacy or
social issues, trading, taxation or accounting practices.
The Group monitors forthcoming legislative and regulatory changes
to enable assessment of and planning for business impacts and to
ensure compliance. External advice is sought where required.
Loss or unavailability of Group sites
The unavailability of Group sites may impact the Group’s usual
business operations.
Where required, much of the Group can continue to operate with
limited site facilities. Resilience is also provided through the Group’s
two large freehold sites in the UK, both with laboratory facilities.
Significant external event impacting normal business operations (for example, pandemic)
A significant external event may restrict the Group’s ability to
undertake its usual business operations or meet customer
demands.
The Group has invested in software and communications tools to
enable a combination of remote and essential office-based working
where required. The diversity of the Group’s businesses, customers
and sites also mitigates potential impacts.
Strategic risks
Mitigation
Acquisitions & strategic investments
The Group has grown through the acquisition of companies
with compatible service and technology offerings. Acquisitions
and strategic investments may bring risks in respect of value,
integration, distraction of key personnel and legacy onerous
obligations.
Acquisition risks are mitigated so far as practicable by the acquisition
decisions and processes being led by the Board and Executive
management team. External advice and expertise are engaged as
required. Risks are also mitigated by the potential for growth and
diversification, whilst increased scale provides efficiencies of back
office functions across the Group.
The Board considers further acquisitions and strategic investments
to be a core part of the Group’s strategy and the Group is continually
monitoring for opportunities.
Key Performance Indicators continued
09
08 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC REPORT
Section 172 Statement
The Companies (Miscellaneous Reporting) Regulations 2018 require qualifying companies to publish a statement explaining how the
Directors have had regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006 (Act) in performing their duties under
section 172.
In accordance with section 172, the Directors confirm that they have continued to act in such a way that they consider, in good faith, would
be most likely to promote the success of the Company for the benefit of its shareholders as a whole and, in doing so, have had regard to the
matters set out below.
Section 172 matters
How the Board has regard to these matters
Page reference
The likely long term consequences of
decisions
The Directors regularly consider the long term consequences of
the Board’s decisions and actions. The Board oversees the Group’s
strategy and closely monitors progress against financial and other
plans throughout the year, both at a Group and divisional level. The
Board also considers the Group’s commercial and operational risks
and how to protect shareholder value.
For more information see the Principal Risks section and the Principal
decisions made during the year.
6-10, 12
The interests of the Company’s employees
The Board recognises that the Group’s employees are essential to its
success and the Directors take a keen interest in the development
and retention of key employees across the Group. The Executive
Directors regularly engage with Managing Directors, management
teams and other employees across the Group to understand
business-specific issues.
For more information see the Social section of the Non-Financial and
Sustainability Information Statement, the Statement on engagement
with employees, and the Report of the Remuneration Committee.
15, 23, 26
The need to foster business relationships
with suppliers, customers and others
While there are circumstances in which the Executive Directors
engage directly with certain stakeholder groups or on certain issues,
the structure of the Group means that engagement with customers
and suppliers usually takes place at an individual business level.
The Board supports the senior management teams in fostering and
maintaining good relationships. The Board monitors relationships
with key customers and suppliers through the Executive Directors
and the Managing Directors. The Managing Directors provide
updates on significant issues in their businesses on a weekly basis to
the Executive Directors and as part of their monthly reporting directly
to the full Board.
For more information see the Statement on engagement with
customers, suppliers and others.
23
The impact of the Company’s operations on
the community and the environment
The Directors are conscious of the importance of investing in and
caring for the physical environments in which the Group operates
and contributing to its local communities. These factors are key to the
Group’s ongoing work to reduce and manage its use of energy, water
and other resources, and its charitable donations.
For more information see the Environmental and Social sections of
the Non-Financial and Sustainability Information Statement and the
Climate-Related Financial Disclosures.
13, 14, 17
The desirability of maintaining a reputation
for high standards of business conduct
The Board sets out the values and standards of behaviour expected
from all of its employees through the Group’s corporate values.
This is supported by the Group’s governance and compliance
framework which requires adherence to a range of Group policies
and procedures including anti-bribery and whistleblowing policies.
The Directors are committed to high standards of business conduct
throughout the Group and take into account the desirability of
maintaining its reputation for the same in their decision making. For
more information see the Governance section of the Non-Financial
and Sustainability Information Statement.
16
The need to act fairly as between
shareholders
The Directors are committed to treating all shareholders equally
and, as part of its decision making process, the Board considers the
interests of shareholders as a whole. The Board recognises that it
may need to balance competing interests in reaching its decisions
and, where there are conflicting interests, the Board will act as
equitably and fairly as it is able to do.
For more information see the Relations with shareholders section of
the Corporate Governance Report.
25
In accordance with the UK Corporate Governance Code January
2024, the Board has determined that a three year period to
December 2027 constitutes an appropriate period over which to
provide its viability statement. The viability assessment considers
solvency and liquidity over a longer period than the going concern
assessment which covers a period to June 2026. Inevitably, the
degree of certainty reduces over the longer period.
The Board prepares a detailed financial plan annually, forecasting
sales and costs at a departmental level and a Group cash
flow covering this period. The plan provides a prudent basis
of assessment whilst enabling the Group to remain agile in
implementing significant opportunities for further growth when
they arise. Performance against the financial plan is reviewed on
a monthly basis by the Board and forecasts are updated at least
quarterly.
The Board has considered sensitivity analyses reflecting downside
scenarios of principal risks (for example a downturn in market
demand) applied to the Group’s financial plan and cash flows
(extended to 18 months from year end).
The scenarios assume an appropriate management response
to the specific event, but not broader mitigating actions which
could be undertaken and which have been considered separately.
Reverse stress testing has also been performed to assess the
severity of scenario that would have to occur to exceed headroom.
The assessment took account of the Group’s current funding,
forecast requirements and existing committed borrowing facilities.
In conclusion, the financial plan withstood the stress testing and
application of downside scenarios.
In each scenario or combination of sensitivity scenarios applied
to the financial plan, the Group is able to rely on its cash reserves,
reduce capital expenditure and take other cost and/or cash
management measures to mitigate the impacts and still have
residual capacity to absorb further unanticipated events.
The financial plan and going concern review formed the basis of
the extended viability assessment. The Board has also considered
the effect of the banking covenants for this assessment period
and noted that there is no expectation of covenant breach,
particularly as the Group ends the year with Net Funds of £26.8
million (2023: £18.0 million). Based on the results of these
analyses, the Directors have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities
as they fall due over the three year period of this assessment.
Financial risks continued
Mitigation
Treasury
Liquidity risk
The Group maintains a strong cash balance and also has access to an
undrawn RCF facility. The Group ensures it can access sufficient cash
to meet any potential short term needs.
Credit and counterparty risks including customer, supplier
and banks
Credit risk with customers is actively managed with weekly review
meetings by local management teams and monthly review by the
Board.
Key suppliers are subject to Executive management approval
including a review of financial position.
The majority of the Group’s cash is held in large UK banks with
regular reviews of cash levels across other countries and accounts.
Interest rate risk
The Group has interest rate swap instruments to fix interest and
remove risk and volatility.
Covenant breach
The Group’s debt facilities include no operating covenants. The risk
of breaching financial covenants is mitigated by maintaining a strong
cash balance. Covenants are reviewed monthly by the Board.
Environmental
The Group’s environmental risks, including in respect of climate change, are detailed in the Climate-Related Financial Disclosures on
page 17.
Key Performance Indicators continued
Viability Statement
11
10 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC REPORT
This Non-Financial and Sustainability Information Statement
includes the Environmental, Social and Governance section below
and the Climate-Related Financial Disclosures on page 17.
Environmental, Social and Governance
The Directors are committed to acting in accordance with high
levels of ethics and governance. A review of the Group’s approach
to sustainability and societal impact during the year is set out
below.
Environmental
The Group is committed to managing the environmental impact
of its activities and to improving resource efficiency and reducing
waste. The Directors consider that, due to the nature of the
Group’s operations, it does not have a significant impact on the
environment. In particular, the Group’s consultancy businesses
deliver consultancy-based projects performed by staff in office
and laboratory facilities, and do not use large quantities of raw
materials or processes that impact the environment. However, the
Group seeks to minimise its carbon impact and recognises that
its activities should be carried out in an environmentally friendly
manner where practicable. Where relevant, the Board has regard
to environmental factors in relation to its strategy and decision
making.
The Group’s Streamlined Energy and Carbon Reporting (‘SECR’)
is included below. See page 17 for the Group’s Climate-Related
Financial Disclosures.
Energy and greenhouse gas (‘GHG’) reporting
Science Group reports its environmental performance in
accordance with the UK Government’s Streamlined Energy and
Carbon Reporting Guidance as required under the Companies
(Directors’ Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018. The Group’s methodology for
this reporting has been developed following the GHG Protocol
Corporate Accounting and Reporting Standard and GHG
emissions are assessed using the 2024 emissions conversions
factors published by the Department for Energy Security and
Net Zero.
The table below summarises the GHG emissions for the year
ended 31 December 2024 on a UK basis. This is the Group’s
second year of SECR reporting and the 2023 assessment results
included below constitute the baseline year for comparison. The
2023 results have been restated to reflect improved data accuracy
and the inclusion of flight emissions data.
The Group continues to refine its data collection to improve
the accuracy and reliability of GHG emissions reporting for
future years.
Non-Financial and Sustainability Information Statement
Scope
Activity
2024 Location based tCO2e
2023 Location based tCO2e
Scope 1
Site gas
382.67
431.25
Company car travel
3.41
2.29
Refrigerant
120.44
2.37
Scope 1 subtotal
506.52
435.90
Scope 2
Site electricity
534.47
581.86
Scope 2 subtotal
534.47
581.86
Scope 3
Employee-owned car travel
133.74
137.54
Hire cars
5.39
2.03
Flights
465.09
520.64
Scope 3 subtotal
604.23
660.25
Total tonnes of CO2e
1,645.22
1,678.02
Tonnes of CO2e per employee1
3.42
2.99
Tonnes of CO2e per £m revenue2
32.23
31.95
Total energy consumption (kWh)3
5,293,926
5,822,284
1 Based on total UK employees as at 31 December 2024
2 Based on UK revenue as at 31 December 2024
3 Includes UK gas, electricity, company vehicles, employee-owned cars and hire cars
Notes:
• Group sites and businesses outside of the UK have not been included.
• Scope 1 and 2 data has been based on invoices for energy consumption across UK sites where possible and internal mileage and refrigerant records. The increase in refrigerant gas
emissions was due to one-off leaks from air conditioning and chiller plant at the Harston site.
• Scope 3 travel data has been collected from employee mileage, flight and fuel expense claims and Group travel agencies.
• Employee-owned car travel and hire car usage relates to UK usage only. Flight data includes flights starting or ending in the UK and wholly international flights by UK employees.
Section 172 Statement continued
Principal decisions made during the year
Some of the key decisions considered by the Board in 2024, taking into account the likely long term consequences and the interests of
stakeholders, are set out below.
Currency exchange instrument
The Company procured two currency exchange instruments to cap the Sterling:US Dollar
rate in relation to the R&D Consultancy business through to the end of 2025. This is in line
with previous currency hedging since 2022 as a result of increased currency volatility. The
Directors considered that the hedges remained appropriate to provide the business with
improved visibility and reduced volatility.
New term loan and RCF
The Group’s current term loan and revolving credit facility were due to expire in late 2026. In
order to support the Group’s corporate strategy, the Board initiated an early refinancing to
renew, increase and extend these facilities. The Directors considered that these new facilities,
combined with the Group’s existing cash resources, would strengthen the Group’s ability to
continue to consider corporate opportunities which may arise. See Note 29 to the Financial
Statements for further details.
Discretionary buyback programme
In October 2024 the Company appointed Panmure Liberum Limited to manage the buyback
of Company shares on an independent basis, subject to defined pre-agreed parameters, to
enable the buyback to continue during closed periods until the earlier of the next Annual
General Meeting and 30 June 2025. The Directors considered the discretionary buyback
programme to be in shareholder’s interests given the Group’s balance sheet, cash resources
and operating cashflow, and the current share price.
Dividend
In considering the appropriate level of dividend payment to shareholders, the Board took
into account the need to maintain cash resources to implement both organic and strategic
investment opportunities and acquisitions, and the varying interests of investors.
Acquisitions and investments
The Company is acquisitive and regularly considers potential acquisitions and strategic
investment opportunities. Throughout the year the Board considered a number of potential
acquisitions although none were considered to be appropriate investments taking into
account the Group’s strategy, the financial impact and likely operational and other risks.
13
12 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC REPORT
Social
Science Group 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 including the
communities within which the Group operates. Furthermore,
Science Group seeks to continually enhance and extend its
science and technology contribution to society through the work
the Group undertakes with its customers and in areas where the
Group decides to invest and explore directly.
The Board regularly monitors the Group’s culture and practices,
including the review of recruitment, retention and turnover data,
health and safety reports, and reports from senior managers
within the Group.
Diversity, equity and inclusion
Science Group is committed to supporting diversity, equity and
inclusion (‘DEI’) among its employees. The Group’s employment
policies are non-discriminatory, particularly on the grounds of
any protected characteristic. This includes, but is not necessarily
limited to, age, gender, nationality, ethnic or racial origin, disability,
religion or belief, pregnancy and maternity, sexual orientation
or marital or civil partnership status. Science Group 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 on merit.
The Group operates a DEI committee to discuss, implement and
monitor various DEI initiatives. During 2024 these included:
•
Engagement with women in the Group: An ongoing series of
lunches for senior and mid-level women across the Group to
provide networking opportunities and support, establishment
of local “Lean In Circles”, and executive-level engagement with
junior women to foster communication and opportunities.
•
Menopause support: Practical support for women including a
monthly support group, awareness training for line managers,
and improvements to relevant health benefits.
•
Recruitment practices: Ongoing monitoring of recruitment
panels to ensure the inclusion of diverse representation and
review of job adverts for unconscious gender bias.
•
Diversity data collection: A voluntary, anonymous diversity
questionnaire was run for employees in the CMS2 and TPG
Services businesses (not included in the 2023 survey) with a
60% response rate.
•
Veterans: The TPG Services business has signed the Armed
Forces Covenant and supports Armed Forces Day each year.
The Board reviews reports on DEI matters at least twice a year.
No Science Group company is currently required to report on its
gender pay gap. However, the Group monitors the relevant data
and the Board reviews this annually.
The Group currently has native speakers of around 25 languages. The gender ratios for the number of persons employed by the Group at
the end of the year are set out in the table below.
31 December 2024
31 December 2023
Male
Female
Male
Female
No
%
No
%
No
%
No
%
Plc Board of Directors & Company
Secretary
4
67%
2
33%
4
67%
2
33%
Senior management & staff (>£75,000
per annum FTE salary)
92
71%
38
29%
101
72%
39
28%
Other employees
242
60%
163
40%
301
61%
193
39%
Total employees
338
62%
203
38%
406
63%
234
37%
Notes:
• Employees are only allocated to one category. For example, where an individual 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.
Employee training and development
Science Group’s employees are its primary asset and the Board
is committed to nurturing their abilities, investing in career
development and rewarding exceptional performance. The Group
offers training and mentorship to allow ambitious individuals
to thrive within their environment and realise their personal
potential. Employee performance is aligned to the Group’s
objectives through an annual performance review process and
ongoing project management, line management and mentorship
feedback. Formal training and career development is offered
to staff of all levels through internal and external programmes
that cover technical, business and managerial advancement
opportunities. Beyond formal training, employees also hold
informal lunchtime sessions on a regular basis to enable
knowledge and skills transfer amongst teams.
The Group regularly takes one year or summer student
placements and the CMS2 business runs an apprenticeship
programme. The Group also supports employees across the
Group with extra-curricular studies and qualifications in relevant
fields.
Financial rewards and support
Employee remuneration and incentives are overseen and
approved by the Remuneration Committee. In addition to its
standard remuneration and benefits packages, the Group invests
in and rewards its workforce through the operation of its bonus
and profit share schemes for qualifying employees, its share
option scheme and other discretionary incentives. During 2024
additional discretionary payments were made to employees
reflecting individual performance. For more information see the
Report of the Remuneration Committee on page 26.
Health and wellbeing
The Group’s employee assistance programmes and other benefits
are available for employees to access a range of medical, financial,
wellbeing and other support services and information. Mental
Health Awareness Week is given a particular focus each year in
the UK with site-specific programmes of activities and support.
The majority of employees are also eligible for private medical
insurance.
Energy efficiency
The Group considers energy efficiency initiatives on an ongoing
basis. Science Group owns two large freehold sites near
Cambridge and Epsom where many energy efficiency measures
have already been implemented but incremental improvements
continue to be made. At its leased properties there are varying
opportunities to influence energy efficiency according to lease
terms and landlord responsibilities and these are assessed on a
case by case basis.
For the freehold properties and other sites where the Group
purchases gas and/or electricity, this is purchased from renewable
sources so far as practicable. Most lighting at the Cambridge and
Epsom sites has been upgraded from fluorescent to LED with the
remainder, as well as lighting at the Portsmouth manufacturing
site, being upgraded when reaching end of life. LED lighting is
installed as standard in new office fit outs. Lighting automation
is used across all large sites as appropriate in lesser used areas,
with more installed in Epsom during the year. At the Cambridge
site the boilers and chillers have been progressively upgraded
to energy efficient versions. Thermal imaging surveys of the roof
are used to identify areas requiring new insulation. At the Epsom
site the original chillers have been replaced with energy efficient
versions and excess capacity has been reduced. At both freehold
sites and Portsmouth, air conditioning and air handling systems
are programmed to increase efficiency and implement timed shut
downs when not required.
The Group undertakes energy audits periodically and implements
practicable recommendations. The Group has previously
considered the installation of solar panels at the Group’s freehold
sites, but this was not found to be economically viable.
Waste and recycling
The Group’s Waste Management Policy supports the continued
reduction of waste and, where practicable, re-use and recycling
of consumables with incremental improvements implemented
during the year. All large sites facilitate the separation of office
waste into recycling and general waste. The Cambridge and
Epsom sites also provide separate facilities for food waste.
Commercial waste is collected in skips at the Cambridge, Epsom
and Portsmouth sites. All office and skip waste collections are
processed by the Group’s waste management contractors at
recycling centres. The Portsmouth site also separates scrap metal
for recycling.
Confidential waste, both paper and hardware, is disposed of by
specialist suppliers and recycled once shredded. Electronic waste,
ink cartridges, fluorescent tubing, and chemical and biological
waste are disposed of responsibly through specialist suppliers and
in accordance with applicable regulations including the Restriction
of Hazardous Substances (‘RoHS’) Directive and the Waste
Electrical and Electronic Equipment (‘WEEE’) Directive.
Water usage
Given the nature of the Group’s businesses, total water
consumption is relatively low, being largely limited to office-based
consumption from bathroom and kitchen facilities. However, the
Group proactively manages the use of water within its sites and
seeks to implement water reduction measures where practicable.
Travel
Electric vehicle charging points are installed at the Cambridge and
Epsom sites for employees’ usage to encourage a move away from
petrol and diesel vehicles. All Science Group companies in the UK
offer employees access to the Government Cycle to Work initiative
offering tax free bicycles as part of the Group’s standard employee
benefits offering. The Group also makes significant use of virtual
meetings where appropriate and has a US-based sales team to
reduce trans-Atlantic travel.
Ecology and conservation
The Cambridge site includes woodland and grassland areas
and a tributary of the river Cam, and the Group maintains these
various ecosystems for the benefit of a wide variety of flora and
fauna including several endangered and protected species. The
Group has previously commissioned ecology surveys to better
understand the biodiversity on site. Tree surveys are undertaken
periodically at both freehold sites, including during 2024, to
assist proactive management. The Epsom property is Grade II
listed within a parkland setting and in recent years the Group has
undertaken significant repair and restoration work on the exterior
stonework to preserve this historic building.
ISO 14001
The CMS2 business holds ISO 14001 (Environmental Management
Systems) certification to assist in managing the environmental
impact of its manufacturing operations at the Group’s
Portsmouth site.
Sustainability services
In the Consultancy Division the number of projects either
wholly related to sustainability or for which this was a major
consideration continues to grow. The division leverages its
broad scientific, commercial and regulatory expertise to develop
sustainability strategies and provide sustainable solutions for
clients across a wide range of industries.
In the R&D Consultancy and Regulatory & Compliance
businesses services cover a wide range of sustainability areas
such as circularity, sustainable sourcing, emissions reduction,
environmental impact, and regulatory impact and compliance.
In the TPG Services business, the Osprey business advises on
the impact of proposed wind and solar farms on aviation safety
and associated mitigations in the planning consent process for
renewable energy developments.
Since 2021 the Group has convened and chaired a high level
discussion forum with Chief Technology Officers and R&D leaders
from major US and European blue chip companies. Originally
focussed on net zero strategy and practice, in 2022 and 2023 the
focus shifted to sustainability and, latterly, sustainability combined
with growth. As a consequence, during 2024 the Group Managing
Director together with other members of the forum contributed
to the United Nations General Assembly’s Science Summit held in
New York.
Compliance
The Group’s operations are conducted in compliance with relevant
environmental legislation. There were no internal or external
environmental incidents during 2024 at any Group site and
Science Group did not incur any fines.
Non-Financial and Sustainability Information Statement continued
15
14 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC REPORT
Climate-Related Financial Disclosures
This is Science Group’s second year of reporting pursuant to
sections 414CA and 414CB of the Companies Act 2006. These
disclosures align with the recommendations issued by the
international Task Force on Climate-related Financial Disclosures
(‘TCFD’). This statement covers Science Group’s governance of
climate change, its integration with overall risk management, the
identification and strategy for managing the Group’s climate-
related issues and opportunities, and the metrics used to measure
progress.
Governance
The Board has overall responsibility for sustainability issues
including the oversight of climate-related matters and effective
management of climate-related risks and opportunities, in
line with the responsibility to monitor any issues which impact
strategy, risk management, and operations of the Group. For more
information on the Board and Board Committees see the Report
of the Directors on page 23. The Board discussed climate-related
issues and the Group’s TCFD-aligned reporting twice during 2024
and was ultimately responsible for approving the Group’s climate-
related financial disclosures. To date it has not been deemed
necessary to nominate an individual Board member to oversee
climate-related issues due to the small size of the Board which
ensures sufficient accountability.
Science Group has a small Executive management team and all
members have responsibility for the management of overall risks
and climate change strategy across the Group. The Executive
team stays in close contact with the Managing Directors to ensure
they are up to date with any risks to the Group. The Company
Secretary has been appointed to formalise the feeding of any
strategy changes to the individual businesses and ensure they are
carrying out specified initiatives against the strategy. Progress is
then reported back to the Board by the Company Secretary.
Based on the assessment of climate-related risks and
opportunities and exposure being at the lower end of scale, as
discussed in the Strategy section below, the Board believes there
is sufficient expertise to manage climate-related matters at the
Board and management levels. Where appropriate, external
consultants may be engaged to advise further.
Risk management
During 2023 Science Group undertook a formal exercise
to identify and assess the Group’s climate-related risks and
opportunities with the support of sustainability consultants.
Identified climate-related risks and opportunities were assessed
using the Group’s existing risk management framework to
integrate them with the Group’s wider business risks and to
enable the significance of climate-related risks relative to these
wider Group risks to be determined. These risks and opportunities
were re-reviewed during 2024 and no significant changes were
identified.
While Science Group’s risk assessment is standardised across
the Group, risks may be unique to different businesses. The
Managing Directors report weekly to the Executive management
team on business performance and any significant issues and
provide formal reports to the full Board on a monthly basis. This
ensures that potential emerging risks identified on the ground are
escalated to the Board in a timely manner. Externally, the Group’s
professional advisors raise relevant potential issues from time
to time.
Identified potential risks are discussed by the Executive
management team. Both the impact (on a five point scale from
Minor to Catastrophic based on financial loss exposure) and
likelihood (on a five point scale from Rare to Very High) of the risks
are assessed and an overall risk rating (on a three point scale from
Green to Red) is determined which allows for the prioritisation of
risks. A mitigation response (avoid, transfer, reduce or accept) is
then determined as required.
The Group has assessed climate-related risks and opportunities
against the following defined time horizons:
Short term
1 to 3 years
In line with specific business
plans and the Group’s viability
statement
Medium term
3 to 10 years
In line with the majority of the
Group’s site lease terms, which
are between 5-10 years in
remaining duration
Long term
More than
10 years
Long enough to encompass
long-term industry and policy
trends, such as UK Net Zero
2050 and for climate-related
risks to manifest
In the Group’s climate-related risk assessment, all risk and
opportunity categories outlined in the TCFD guidance have been
considered. Risks have been assessed in relation to the Group’s
own operations, supply chain and downstream. Not all risk
categories are applicable or material to the business.
The Group’s climate-related risks are included in the risk register
which was reviewed and approved by the Board during the
year. Where appropriate, identified risks may also be assigned
to a working party to keep a watching brief and update the
Board as appropriate, although this was not deemed necessary
during 2024.
Strategy
As a science and technology business primarily providing
consultancy services, Science Group is at the lower end of
exposure for climate-related risks. Based on the risk exposure
after mitigation outlined in this statement, the Board believes that
the Group is resilient to climate change and does not require a
fundamental change to its strategy, financial planning or budgets.
There are no effects of climate-related matters reflected in
judgements and estimates applied in the financial statements.
The key climate-related risks and opportunities for the Group are:
•
Physical risks: As Science Group sites span the UK, Europe, US
and Asia, and the Frontier business relies on manufacturing
suppliers in Asia, the Group is currently exposed to physical
risks that continue to persist into the long term. Adequate
mitigation strategies including, where practicable, considering
climate factors when choosing sites and diversifying suppliers
will assist the Group to withstand these potential physical
risks.
•
Transition risks: The Group provides services and systems to
customers in a range of sectors including medical, defence,
industrial and consumer. This adds complexity to the analysis
as these customers face their own climate-related issues and
reporting pressures on them could be passed to Science
Group. Keeping abreast of reporting expectations will reduce
this risk.
•
Opportunities: Opportunities exist both operationally to
reduce the Group’s scope 1 and 2 emissions and in the market
to assist customers who need to adapt to climate change.
Charitable donations
Science Group focuses its charitable donations on organisations
supporting people-related issues. During 2024 this primarily
included donations to charities supporting health issues. The
Group’s Charitable Donations Policy also supports the matching of
funds raised by employees on a discretionary basis.
Governance
The Board considers sound governance a critical component
of Science Group’s success and the delivery of its strategy.
Science Group 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 seeks to ensure that
Science Group’s values are reinforced in employee behaviour and
that effective risk management is promoted.
The Board takes issues of governance seriously and seeks
to ensure transparency and streamlined administration. The
Directors bring a broad range of technical, commercial, business,
accounting, audit and corporate finance expertise. Culturally,
the Board demonstrates a high degree of integrity, fairness
and non-discrimination and promotes these values through the
organisation. For more information see the Corporate Governance
Report on page 25.
Ethical business conduct
The Board is committed to high standards of governance and
ethics. The Group has a strong ethical culture and it is the Group’s
policy to conduct all business in an honest and ethical manner.
The Group’s Ethics Policy and other associated policies set out the
standards of behaviour expected from all those working for or on
behalf of the Group.
Anti-bribery
Science Group has a zero tolerance approach to bribery
and corruption. The Group’s Anti-Bribery Policy applies to all
employees and the Group seeks to impose equivalent principles
on suppliers and representatives.
Modern slavery
In accordance with the requirements of the Modern Slavery Act
2015, the Group publishes an annual statement setting out the
steps taken to ensure that slavery and human trafficking are not
present in the Group’s businesses and supply chains. A copy of the
current statement, together with previous versions, can be found
on the Investor information page of the Science Group website.
Whistleblowing
The Group’s Whistleblowing Policy provides protection and
support for whistleblowers raising a genuine concern. One of the
Group’s Non-Executive Directors acts as the escalation contact for
whistleblowing reports.
Cyber and data security
Science Group proactively manages the security of its IT networks
and the confidential and sensitive data held by the Group. The
Group has documented Information Security, IT and data privacy
policies and implements regular cyber awareness training for all
staff, test phishing campaigns and penetration testing. Businesses
operating in the defence industry are subject to heightened
monitoring of cyber threats, and the associated IT networks
hold ISO 27001 (Information Security Management) and Cyber
Essentials Plus certifications and other accreditations.
During 2024 the Group developed a Generative AI policy to
provide a framework for the control and assessment of the use
of Generative AI tools and use cases within the Group to ensure,
among other things, appropriate IT security protections.
Health and safety
Science Group is committed to the health and safety of its
employees, customers, sub-contractors and others who may be
affected by the Group’s activities. The Group evaluates the risks
to health and safety in the business and manages this through its
Health and Safety Management Systems. The Group’s Health and
Safety at Work policies are reviewed and updated regularly.
The Board Executive Director responsible for health and safety is
the Group Finance Director with day to day responsibility being
undertaken by the Company Secretary. The Directors receive
monthly health and safety reports covering all sites which include
updates on safety incidents across the Group.
The Group’s largest sites (Cambridge, Epsom and Portsmouth)
have dedicated Health and Safety Committees that meet quarterly.
Laboratory and manufacturing areas are subject to monthly
inspections by competent reviewers and the results are reported
on a monthly basis to the Board. Access to laboratory and test
facilities is electronically controlled with permissions reviewed on a
regular basis. The Portsmouth site holds ISO 45001 (Occupational
Health and Safety Management) certification.
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
Systems ensure compliance with applicable legal and regulatory
requirements and internal standards and seeks, by continuous
improvement, to develop health and safety performance.
Supplier management process
The Group operates a supplier management process to ensure
Executive management review of proposals to engage new large
or business critical suppliers.
Administrative rationalisation
The Group regularly reviews and closes dormant legal entities
to reduce administrative costs. During 2024 two entities were
dissolved and some administrative functions were integrated
across the Consultancy Division to improve operational efficiencies
and governance. The Group also rationalises its property portfolio
where appropriate to reduce overheads and increase efficiencies.
Non-Financial and Sustainability Information Statement continued
17
16 Annual Report and Financial Statements 2024
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STRATEGIC REPORT
Risk 2: Flood & heat disruption in supply chain
Physical climate-related risks could impact the Group’s suppliers.
Some components used in the Frontier business are specialised
and supply cannot easily be switched out for alternatives.
Therefore, weather disruption to suppliers in this business could
severely impact the supply chain and the Group’s ability to fulfil
customer contracts.
The Frontier business uses seven key suppliers across nine sites
for the supply of components, outsourced manufacturing and
logistics. These sites are located in mainland China, Hong Kong,
South Korea, Singapore and the Philippines and have been
assessed for physical climate-related risks as follows:
•
There is a high risk of heat stress for four supplier sites
which continues under the RCP 8.5 scenario for 2030,
2050 and 2100 and for one supplier site under the RCP 8.5
scenario for 2100 (the latter being a logistics provider for
which alternatives are readily available). This is expected
be a limited risk as staff are not working outside. During
the year, Frontier sought to engage with these suppliers to
understand any issues associated with the risk of heat stress
and their potential mitigations but has been unable to obtain
detailed information. Any new information received will be
kept under review. All nine of the supplier sites (three being
logistics providers) have a high precipitation stress risk which
continues under the RCP 8.5 scenario for 2030, 2050 and
2100. As the risk is already high and the suppliers have been
able to operate under these conditions, it is assumed that the
risk is manageable. Similarly, the tropical cyclone risk for two
supplier sites is already high and appears manageable.
•
Three supplier sites (two being logistics providers) have
current high or extreme flood risk. During the year Frontier
sought to investigate the potential impacts of floods on these
suppliers and understand what safeguards they have in place,
but has been unable to obtain detailed information. Any new
information received will be kept under review.
•
The analysis of supplier sites also investigated fire stress, sea
level rise and drought stress of which there was no impact.
The Frontier business contributed approximately 11% of the
Group’s revenue in 2024 and disruption in the supply chain could
result in serious loss if not mitigated. While options for alternative
suppliers in the region which are not impacted by similar risks may
be limited, these are kept under review.
Transition climate-related risks
Risk #
1. Carbon pricing in operations
& value chain
2. Reputational risk linked to sustainability
performance & reporting
Type
Transition (Market), Policy & Legal, Reputation
Transition (Market), Reputation
Area
Group operations & upstream
Upstream
Primary potential financial impact
Higher energy, raw materials & transport costs
Lost revenue
Time horizon
Medium term
Medium term
Likelihood
High
Medium
Impact
Minor
Minor
Location or service most impacted
CMS2 & Frontier businesses due to higher
emission profiles
Group-wide
The following two climate-related scenarios, published by the
International Energy Agency (‘IEA’), have been used to assess the
Group’s transition risks:
A.
Net Zero 2050 (‘NZE’): an ambitious scenario which sets out a
pathway for the global energy sector to achieve net zero CO2
emissions by 2050.
B.
Stated Policies Scenario (‘STEPS’): a scenario which represents
the roll forward of already announced policy measures. This
scenario outlines a combination of physical and transitions
risk impacts as temperatures rise by around 2.5°C by 2100
from pre-industrial levels, with a 50% probability. This
scenario is included as it represents a base case pathway with
a trajectory implied by today’s policy settings.
Risk 3: Carbon pricing in operations & value chain
For the Group’s operational emissions (scope 1 and 2), carbon
pricing risks represent a risk of higher energy prices. For the
Group’s principal value chain (upstream scope 3) emissions,
carbon pricing mechanisms could result in higher costs of
purchased goods or in-bound transportation.
The IEA forecasts that carbon prices (US$/tCO2e) relevant to the
Group are projected to increase from $140/t in 2030 to $250/t in
2050 under the NZE scenario and from $90/t in 2030 to $113/t
in 2050 under the STEPS scenario. The impact of this has been
assessed as follows:
•
Scope 1 and 2 emissions: The forecast carbon prices have
a minor impact in both the NZE and STEPS scenarios when
applied to the Group’s reported operational emissions for
2024 (see the Energy and greenhouse gas (‘GHG’) reporting
section on page 13). This does not take account of any future
mitigation actions or material changes to the business and
assumes that the full impact of carbon prices is passed onto
the Group.
•
Scope 3 emissions: This is the second year of the Group’s
reporting on its emissions and energy usage and the
reporting includes limited scope 3 emissions (see the Energy
and greenhouse gas (‘GHG’) reporting section on page 13).
Since the Group’s full scope 3 emissions footprint has not yet
been calculated, the full financial impact of the forecast carbon
prices cannot be assessed at this stage. It is also uncertain
how and when carbon prices will be imposed in the value
chain and how much will be passed on to the Group. However,
the Group’s current view is that the impact of carbon pricing
in the value chain is likely to be minor. As the sophistication of
the Group’s scope 3 emissions reporting increases, a clearer
insight will develop into the impact on the Group and how this
may be mitigated.
Given its nature, there is limited scope for the Group to manage
this risk but it will be kept under review.
Other risks and opportunities have been assessed according
to the TCFD guidance including increased costs for critical raw
materials, technological redundancy of equipment, reputational
risk due to projects in high environmental impact sectors and
products that reduce energy usage. However, these have been
deemed to be immaterial to the Group.
Science Group will continue to develop its analysis as new data
becomes available, both internally and externally, and will continue
to monitor climate exposures and action plans through the
Group’s risk management framework. Details of the physical and
transition risks and opportunities identified are outlined below.
Physical climate-related risks
Risk #
1. Storm and flood disruption
2. Flood & heat disruption in supply chain
Acute/Chronic
Acute
Acute
Area
Group operations
Upstream
Primary potential financial impact
Lost production & revenue, asset damage
Lost production and revenue
Time horizon
Short & long term
Short, medium & long term
Likelihood
Low
Medium
Impact
Significant
Serious
Location or service most impacted
CMS2 business – Portsmouth site
Frontier suppliers in Asia
The Group’s site portfolio has been assessed for physical climate-
related risks using geospatial risk modelling software and it was
determined that the overall risk is limited. The Group’s small
office locations were excluded as, in the event of site-related or
commuting-related disruption, relevant staff would be able to
work from home limiting the loss of business productivity.
Of the Group’s three largest sites (Cambridge, Epsom and
Portsmouth), only the Portsmouth manufacturing site has any
associated physical risks.
The Intergovernmental Panel on Climate Change (‘IPCC’)
has developed a suite of scenarios that represent the future
pathways of carbon in the atmosphere. Each of these is titled as
a Representative Concentration Pathway (‘RCP’). The following
three IPCC climate-related scenarios have been used to assess the
Group’s physical climate-related risks:
A.
RCP 2.6: a climate-positive pathway, likely to keep global
temperature rise below 2°C by 2100. CO2 emissions start
declining by 2020 and go to zero by 2100.
B.
RCP 4.5: an intermediate and probable baseline scenario,
more likely than not to result in global temperature rise
between 2°C and 3°C, by 2100 with a mean sea level rise 35%
higher than that of RCP 2.6. Many plant and animal species
will be unable to adapt to the effects of RCP 4.5 and higher
RCPs. Emissions peak around 2040, then decline.
C.
RCP 8.5: a bad case scenario where global temperatures rise
between 4.1°C to 4.8°C by 2100. This scenario is included for
its extreme impacts on physical climate risks as the global
response to mitigating climate change is limited.
Risk 1: Storm and flood disruption
The Group’s Portsmouth site is the manufacturing facility for
the CMS2 business and includes an industrial unit with a large
factory floor located in the middle of a commercial estate. The
site is currently subject to extreme exposure risk to flood due to
a 1 in 100 years storm surge risk and an extreme risk of sea level
rise under the RCP 8.5 scenario in 2100, and therefore the risk of
flooding continues into the future. The Group is not aware of any
incidents or insurance claims related to such events during the
last 10 years. Floods can be difficult to predict so this risk will be
actively monitored. The risk is well known and Portsmouth Council
is investing to improve sea defences which will assist in protecting
the Portsmouth site into the longer term.
The CMS2 business contributed approximately 23% of the Group’s
revenue in 2024. Although disruption from weather events may
be covered by insurance, any requirement for the business to
move locations, an inability to operate at full capacity or a lack of
manufacturing equipment and facilities could result in significant
delays to fulfilling customer contracts and possible damage to
CMS2’s reputation. CMS2 has a long track record and a strong
market position which may protect the division from customer
switching although this could change in the longer term. Two
servers are housed at the Portsmouth site. The risk of disruption
to the CMS2 business’s IT infrastructure as a result of flooding is
mitigated by daily back ups both locally and to servers at another
Group site.
The Board has considered mitigating the risk of storm and flood
disruption more broadly by relocating the manufacturing facility
to higher ground. However, the existing site lease continues until
2033 and it would cost an estimated £4.5-£5.0 million to relocate
now (including ongoing existing lease costs as well as rental and
fit out costs for a new site). The Board does not consider this to be
an economically viable option given the size of the CMS2 business
and the cost and likelihood of the current climate-related risk.
When the existing lease expires the Board currently expects to
relocate the CMS2 business at that stage to mitigate the longer
term risks. More generally, these risks are mitigated by the Group’s
insurance policies which include cover for property damage and
business interruption.
Non-Financial and Sustainability Information Statement continued
19
18 Annual Report and Financial Statements 2024
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STRATEGIC REPORT
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STRATEGIC REPORT
Risk 4: Reputational risk linked to sustainability
performance & reporting
There is an increasing trend of investors incorporating
sustainability criteria into their assessments. The Group has not
experienced adverse investor interaction on climate change to
date although ESG has been a topic of discussion with some
investors. The Group’s bank loan and debt facilities are not tied to
sustainability criteria and no negative feedback has been received
from the Group’s banks.
The Consultancy Division sees some customer’s incorporating
climate-related and other ESG topics into supplier questionnaires
although this has had no significant impact to date.
There are limited opportunities to mitigate this risk but the Group
will keep sustainability performance and reporting under close
review.
Climate-related opportunities
Opportunity #
1. Market opportunities
2. Operational opportunities
Type
Market
Energy source, resource efficiency
Area
Group operations
Group operations
Primary potential financial impact
Increased revenue
Reduced cost variability, reduced exposure to
carbon taxes
Time horizon
Short term
Short term
Likelihood
High
High
Impact
Significant
Minor
Location or service most impacted
R&D Consultancy & Regulatory
& Compliance businesses
Group-wide
Opportunity 1: Market opportunities
It is anticipated that demand for sustainability-related services
will grow as customers continue to adapt to climate change
and mitigate their climate risks. Science Group’s cross-divisional
sustainability practice seeks to take advantage of this opportunity
by supporting customers with management and strategy services,
sustainable innovation and product stewardship. The Group
has seen an increased focus on sustainability in both the R&D
Consultancy business, which supports customers’ exploration of
possible scientific and technological solutions to climate-related
challenges, and the Regulatory & Compliance business where
sustainability concerns are driving a desire to reduce chemical
usage and identify less harmful alternatives. For more information
see the Sustainability services section on page 14.
Opportunity 2: Operational opportunities
The Group has already implemented many renewable energy and
energy reduction initiatives in its offices (see the Energy efficiency
section on page 14). Similarly, water consumption and waste have
a minimal impact as the majority of the Group’s sites are offices.
However, there is still opportunity for incremental improvements
to resource efficiencies and these will continue to be explored. The
CMS2 manufacturing site in Portsmouth has not yet been formally
assessed for energy reductions and may represent the greatest
opportunity in this area.
Non-Financial and Sustainability Information Statement continued
Metrics and Targets
The Board does not consider that climate-related risks currently
pose a significant risk to the Group’s business. However, during
2024 the Group considered appropriate metrics to track
identified climate-related risks and opportunities. Initial metrics
to be tracked are set out below. At present the Group has not
established targets associated with these metrics.
Climate-related risk/opportunity
Metric
Opportunity: reduction of energy
usage at UK sites
Assessment of energy
usage and emissions
(‘SECR’)
Opportunity: provision of
sustainability-related consultancy
services
Revenue generated from
relevant projects
The Group will continue to review its metrics, and any potential
targets, on an annual basis and may adapt these metrics or adopt
new metrics and/or targets as its governance and assessment of
climate-related risks and opportunities evolves.
The Group reports on its scope 1, 2 and limited scope 3 emissions
for the second time for the year ended 31 December 2024. This
is included in the Energy and greenhouse gas (‘GHG’) reporting
section on page 13. Science Group recognises the requirements
of all businesses to contribute to the UK’s 2050 net zero
ambitions. While in its first year of SECR reporting, the Group
reported on the mandatory scope 3 emissions, the Group has
built on this as its data collection and reporting processes evolve
and flight emissions data is therefore included within scope 3
reporting this year and in the restated 2023 assessment results.
Science Group will continue to explore calculating additional scope
3 emissions in future reports.
Approved by the Board of Directors on 21 March 2025 and signed
on its behalf by:
Martyn Ratcliffe
Executive Chair
21
20 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC REPORT
23
Report of the Directors
25
Corporate Governance Report
26
Report of the Remuneration Committee
27
Report of the Audit Committee
28
Report of the Nomination Committee
29
Directors’ Responsibilities
30
Independent Auditor’s Report
Report of the Directors
The Directors present their annual report on the business
of Science Group plc together with Consolidated Financial
Statements and Independent Auditor’s Report for the year ended
31 December 2024.
Accompanying the Report of the Directors is the Strategic Report.
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 Statement of Executive
Chair and Financial 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 41.
Subject to shareholder approval at the next Annual General
Meeting, the Directors propose to pay a final dividend of 8.0 pence
per share for the year ended 31 December 2024 (2023: 8.0 pence
per share).
Financial instruments and risk management
Disclosures regarding financial instruments are provided within
Note 3 to the Financial Statements.
Directors
The Directors and associated biographies are listed on page 24.
Daniel Edwards and Jon Brett will retire by rotation and offer
themselves for re-election at the next Annual General Meeting.
Directors’ Indemnities
The Directors have the benefit of an indemnity provision contained
in the Articles. The Directors have also been granted a qualifying
third party indemnity provision which was in force throughout
the financial year and remains in force. In addition, throughout
the year the Company purchased and maintained Directors’ and
Officers’ liability insurance in respect of itself and for its Directors
and Officers.
Annual General Meeting
The next Annual General Meeting (‘AGM’) will be held on 21 May
2025 at 17 Waterloo Place, London, SW1Y 4AR. The AGM notice
contains the full text of resolutions to be proposed.
Purchase of own shares
At the AGM on 18 June 2024 shareholders approved a resolution
for the Company to buy back up to 10% of its own shares. This
resolution remains valid until the conclusion of the next Annual
General Meeting in 2025 or 30 June 2025 if earlier. As at the date
of this report, the Company has bought back 1,096,794 shares
pursuant to this authority. Throughout 2024 the Company bought
back a total of 1,080,507 shares at a cost of £5.0 million pursuant
to both the 2024 AGM authority and the equivalent authority
approved at the 2023 AGM. The nominal value of the share
purchased was £10,805. For further information refer to Note 22.
Since October 2024, the Company’s buyback programme has
been delegated to Panmure Liberum Limited on a discretionary
basis, based on parameters defined by the Board at certain
windows.
Employees
The average number of persons, including Directors, employed
by the Group and their remuneration is set out in Note 8 to the
Financial Statements.
Statement on engagement with employees
The Board recognises the importance of engagement with
employees and considers the current balance of engagement to
be appropriate and reasonable given the size of the Group.
At a Group level, employees are provided with information on
matters of concern to them through the Group’s intranets,
human resources (‘HR’) policies, direct updates from the HR
team, and formal and informal meetings with line managers
and senior managers. Individual businesses manage their own
internal communications delivered across a variety of channels
as appropriate. These include regular town hall meetings and
presentations where employees have the opportunity to ask
questions. The Executive Directors contribute to business
management team meetings and away days as appropriate.
Executive Directors regularly visit UK sites to engage directly with
local management teams and employees in person, and work
closely with Managing Directors. Employee communications are
also made by Executive Directors through direct all-employee
emails and update presentations.
The Group also implements a range of practices, policies and
procedures to enable effective engagement with employees
including mentoring, training and development programmes,
appraisal processes and the Group’s whistleblowing policy.
Engagement with the Group’s strategy, performance and values
is encouraged through reward payments made under the
Group’s bonus and profit share schemes and other discretionary
incentives and, for more senior grades, the award of share
options.
Statement on engagement with customers, suppliers
and others
Engagement with customers, suppliers and other stakeholders
in the business is an important factor in ensuring the successful
implementation of the Group’s strategy.
Engagement with customers and suppliers usually takes place
at an individual business and project level. Where appropriate,
the relevant management teams engage with customers over
long-term or strategic programmes of work to foster strong
relationships and enable the Group to understand customers’
initiatives and priorities.
The development and maintaining of relationships with
customers is taken into account in key account management,
the development and improvement of service offerings, the
ongoing review and strengthening of the Group’s Quality
Assurance procedures, and the maintenance of ISO 9001 (Quality
Management Systems), ISO 13485 (Quality Management Systems
for Medical Devices) and ISO 17025 (Testing and Calibration
Laboratories) certifications in relevant businesses. In relation to
suppliers, the need for good business relationships is considered
when reviewing key and critical supplier lists, inventory purchasing
and supplier payment terms.
Disabled persons
The Company gives full and fair consideration to suitable
applications for employment from disabled persons where a
disabled person can adequately fulfil the requirements of the role.
Where an employee of the Company becomes disabled during
the course of their employment the Company would seek to
arrange appropriate further training for the employee, and make
reasonable adjustments to the employee’s working environment,
where it is possible for the employee to continue fulfilling the
requirements of their role. Employees with a disability are eligible
to participate in career development opportunities across the
Company including training and promotion opportunities.
23
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
22 Annual Report and Financial Statements 2024
GOVERNANCE
Donations
Total charitable contributions made by the Group in 2024 were
approximately £3,500 (2023: £8,000). No political donations were
made during the period (2023: £nil). For more information see the
Charitable donations section on page 16.
Energy usage and greenhouse gas emissions
The Company is required to disclose its UK energy usage and
associated greenhouse gas emissions under the Streamlined
Energy and Carbon Reporting Regulations. Details are set out in
the Environmental section of the Non-Financial and Sustainability
Information Statement on page 13.
Research and development
Science Group provides outsourced science-based services and
therefore has an inherent and continuing commitment to high
levels of research and development, primarily on behalf of its
customers but also, when appropriate, on its own behalf.
Post balance sheet events
Post balance sheet events are disclosed in Note 29 to the Financial
Statements.
Auditor
Grant Thornton UK LLP was reappointed as auditor at the AGM
on 18 June 2024. Grant Thornton UK LLP is willing to continue in
office and a resolution to reappoint Grant Thornton UK LLP will be
proposed at the forthcoming AGM.
Disclosure of information to auditors
The Directors who held office at the date of approval of this
Directors’ report confirm that, so far as they are each aware, there
is no relevant audit information of which the Company’s auditor
is unaware and each Director has taken all the steps that they
ought to have taken as a Director to make themselves aware of
any relevant audit information and to establish that the Company’s
auditor is aware of that information.
Directors
The Directors of the Company who served during the year were:
Director
Role at 31 December 2024
Date of
(re) appointment
Board Committee
Martyn Ratcliffe
Executive Chair
18/05/2023
N
Daniel Edwards
Group Managing Director
18/05/2022
Jon Brett
Group Finance Director
18/05/2022
Peter Bertram+
Non–Executive
18/06/2024
A
N
R
Susan Clement Davies+
Non–Executive
18/05/2023
A
N
R
A = Audit Committee; R = Remuneration Committee; N = Nomination Committee
+ Independent Director
Directors’ Biographies
Below are the biographies of the current Directors:
Martyn Ratcliffe
Executive Chair
Martyn Ratcliffe was appointed Chairman on 15 April 2010
following his investment in Sagentia Group, now Science Group.
He was Chairman of Microgen plc from 1998 to 2016 and
Chairman of RM plc from 2011 to 2013. 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.
Daniel Edwards
Group Managing Director*
Dan Edwards was appointed to the Board on 24 April 2019. Mr
Edwards joined the Company in 2004 and has held a number of
roles within the Group including four years in the US before being
appointed Managing Director in 2012. He has an Engineering
degree from the University of Cambridge and an MBA from
Harvard Business School. He started his career at Rolls-Royce plc.
Jon Brett
Group Finance Director*
Jon Brett was appointed to the Board as Acting Finance Director
on 10 August 2021 and confirmed as Finance Director on 1 March
2022. Mr Brett joined Science Group as Financial Controller in
March 2020 and was previously Group Financial Controller for
Study Group Limited. He trained with Deloitte LLP and qualified as
a Certified Accountant in 2004.
Peter Bertram
Senior Independent Director
Peter Bertram was appointed as a Non-Executive Director on 17
June 2020. He has previously held a variety of Non-Executive board
positions including Alphameric plc, Anite plc, Manolete Partners
plc, Microgen plc, Phoenix IT Group plc and Psion plc and was CEO
of Azlan Group plc. Mr Bertram is a Chartered Accountant and has
a degree in Accounting from the University of Kent.
Susan Clement Davies
Independent Director
Susan Clement Davies was appointed a Non-Executive Director
on 18 May 2022. Ms Clement Davies has over 25 years capital
markets and investment banking experience, including 10 years
at Citigroup/Salomon Smith Barney. She is currently non-executive
director of MiNA Therapeutics and Scancell Holdings plc, advisor
at Oxford Science Enterprises and Member of the CW+ NHS
Hospital Innovation Advisory Board. She has an Economics degree
from the University College London and an MSc in Economics
from London School of Economics.
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.
The Company is registered in England and Wales and listed
on the Alternative Investment Market of the London Stock
Exchange (‘AIM’).
Adoption of recognised corporate governance code
The Board has previously adopted the Financial Reporting
Council’s UK Corporate Governance Code July 2018 which is
applicable for the year ending 31 December 2024. With effect
from 1 January 2025, the Company is operating pursuant to
Financial Reporting Council’s UK Corporate Governance Code
January 2024. The Company’s statement of compliance and
associated disclosures are available on the Investor information
pages of the Company’s website.
Board of Directors
At 31 December 2024 the Board comprised an Executive Chair
(part-time), Group Managing Director, Group Finance Director,
and two 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 Executive
Chair, Group Managing Director and Group Finance Director
present if appropriate.
The Executive Chair is primarily responsible for the working of the
Board of Science Group plc and the Group corporate strategy.
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 Executive
Board members, Managing Directors and other senior managers
within the frameworks approved in the annual financial plan and
Board-approved authorisation levels.
The Board met 20 times during 2024 (2023: 13). The Board
regulations define a framework of high-level authorities that map
the structure of delegation below Board level, as well as specifying
issues which remain within the Board’s preserve.
The Board typically holds ten regular meetings a year to consider
a formal schedule of matters including the operating performance
of the business and to review Science Group’s financial plan and
business model. Other meetings are held on an ad hoc basis as
the need arises.
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 (from their last appointment) 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 Science Group.
It is the responsibility of the Executive Chair 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 establish and maintain a mutual
understanding of objectives between Science Group and its major
shareholders by meeting to discuss long-term issues and receive
feedback, communicating regularly throughout the year and
issuing trading or business updates as appropriate.
Engagement with shareholders is primarily via trading updates
and other important information through announcements made
via a regulatory news service and the Science Group website.
During 2024 the Company issued two trading updates in addition
to the Preliminary and Interim Results statements. Regular
updates are also made to the Investor section of the Science
Group website. The 2023 annual report was made available to all
shareholders together with the notice of the 2024 Annual General
Meeting. All shareholders were invited to attend the AGM and had
the opportunity to ask questions of the Directors.
Remuneration strategy
Science Group operates in a competitive market. If Science
Group 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. Science
Group 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 2024, in
addition to base salary, benefits included pension contributions,
healthcare and life assurance benefits, Group bonus and profit
share schemes, additional bonus schemes based on achievement
of billed hours targets for certain businesses within the Group,
a commission scheme for sales people and, where appropriate,
share options.
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 Chairs at Board meetings.
The Board does not conduct a formal performance evaluation of
the Directors nor do the independent Non-Executive Directors
formally appraise the Executive Chair. The Board conducts an
annual internal evaluation of the Board and its committees, the
results of which are reviewed and discussed by the Board. Due to
the small size of the Board this annual evaluation, together with
regular informal performance evaluations of Directors and the
Executive Chair by the Board, is considered sufficient.
Audit Committee
The Audit Committee is chaired by Peter Bertram and comprises
Peter Bertram and Susan Clement Davies. The Audit Committee
met 4 times during 2024 (2023: 3). It considers the findings
from the Company’s auditors and tax advisors. Further details
on the Audit Committee are provided in the Report of the Audit
Committee on page 27.
Remuneration Committee
The Remuneration Committee is chaired by Susan Clement
Davies and comprises Susan Clement Davies and Peter Bertram.
The Remuneration Committee met 13 times during 2024 (2023:
8). It may take advice from time to time from external advisers
but did not do so in 2024. Further details on the Remuneration
Committee are provided in the Report of the Remuneration
Committee on page 26.
* To stand for re-election at the next AGM
Corporate Governance Report
Report of the Directors continued
25
24 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
GOVERNANCE
Board Committees continued
Nomination Committee
The Nomination Committee is chaired by Martyn Ratcliffe and comprises Martyn Ratcliffe, Peter Bertram and Susan Clement Davies. The
Nomination Committee met twice during 2024 (2023: 1). It may take advice from time to time from external advisers but did not do so in
2024. Further details on the Nomination Committee are provided in the Report of the Nomination Committee on page 28.
Meetings of the Board and sub-committees during 2024 were as follows:
Board
Meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
Number of meetings held in 2024
20
4
13
2
Martyn Ratcliffe
20
4
11
2
Jon Brett
20
4*
8*
0
Daniel Edwards
19
4*
7*
0
Peter Bertram
20
4
13
2
Susan Clement Davies
20
4
13
2
* Attendance by invitation
Report of the Remuneration Committee
The Remuneration Committee is chaired by Susan Clement Davies
and comprises Susan Clement Davies and Peter Bertram.
The Remuneration Committee monitors the remuneration policies
of Science Group to ensure that they are consistent with Science
Group’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 Remuneration Committee determines
the individual remuneration package of the Executive Chair and
Executive Directors, and also reviews remuneration packages for
all senior employees of Science Group. This responsibility includes
pension rights and any other compensation payments including
bonus and profit share payments and share option awards. The
Remuneration Committee’s remuneration practices do not include
engagement with employees regarding Executive remuneration.
The Remuneration Committee recognises that incentivisation of
staff is a key issue for Science Group, 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 Science Group
results. During the year, the Remuneration Committee approved
grants of share options and confirmed Group profit related
bonus and profit share schemes for the Company for 2024. The
Remuneration Committee also approved a number of individual
discretionary bonuses and a festive winter bonus of £200 per
person. All such payments are pro-rated for part time staff and,
where appropriate, localised for employees outside of the UK.
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 Science Group.
From time to time the Remuneration 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 Science Group,
especially when undertaking salary/remuneration reviews.
The Company is not required to, and does not, engage with
shareholders regarding its remuneration policy. The remuneration
policies operated as intended during the year.
Employee remuneration can include the following elements:
•
basic salary: normally reviewed annually and set to reflect
market conditions, personal performance and benchmarks in
comparable companies. A limited interim review is normally
undertaken each year reflecting the accelerated progress
that more junior grades may require as they rapidly gain
experience.
•
annual Group performance-related bonus or profit share:
Executives, managers and eligible employees receive
annual bonus or profit share payments related to company
performance. The bonus scheme includes a claw back
mechanism in certain circumstances. The Executive Chair
does not participate in the Group annual performance-related
bonus scheme but the Remuneration Committee may at its
sole discretion award a bonus if appropriate.
•
billed hours bonus: employees in certain businesses
participate in additional bonus schemes based on
achievement of billed hours targets.
•
commission: some employees in sales roles participate
in commission schemes based on revenue received from
relevant sales. These employees are not eligible for the Group
bonus or profit share schemes.
•
benefits: benefits include medical insurance, income
protection, life assurance and pension contributions. The
Executive Chair does not receive these benefits.
•
share options: share option grants are normally reviewed
annually and granted on a discretionary basis by the
Remuneration Committee. The Executive Chair has excluded
himself from all such awards since 2010.
Full details of each Director’s remuneration package and their
interests in shares and share options can be found in Note 9 to
the Financial Statements. There are no elements of remuneration,
other than basic earnings, which are treated as being pensionable.
Share option plans
The Company’s current unapproved Performance Share
Plan (‘PSP’) was adopted by the Company and approved by
shareholders in 2022 on broadly equivalent terms to its previous
PSP. All options granted under a PSP scheme are issued at the
nominal share price. The Remuneration Committee approves any
options granted.
Directors are entitled to participate in Science Group’s share
option schemes. It is the policy of Science Group to grant share
options to Executive Directors and key employees as a means of
encouraging ownership and providing incentives for performance.
Independent Non-Executive Directors do not participate in Science
Group’s share option schemes. The only share options granted
to the Executive Chair, which occurred in 2010, were specifically
approved by shareholders and he excludes himself from annual
awards.
Director contracts and remuneration
The Executive Directors 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.
The Executive Chair and Non-Executive Directors receive a fixed
salary. The Executive Chair does not participate in the Group
bonus scheme but, if appropriate, the Remuneration Committee
may award a discretionary bonus. Remuneration of the Executive
Directors (excluding the Executive Chair) follows a simple structure
of base salary, bonus and long term incentives using share
options, including under the Enhanced Executive Incentive (‘EEI’)
addendum to the PSP plan that was approved by shareholders at
the 2022 AGM. The Executive Chair is not formally excluded from
the share option plan but has declined awards of share options
since 2010.
The market price of the shares at 31 December 2024 was 453.0
pence (2023: 392.0 pence). The highest and lowest price during
the year was 492.0 pence and 373.0 pence respectively.
Report of the Audit Committee
The Audit Committee is chaired by Peter Bertram and comprises
Peter Bertram and Susan Clement Davies. Other Directors and
relevant senior managers attend by invitation.
The Audit Committee provides a mechanism through which the
Board can maintain the integrity of the financial statements of
Science Group (including financial reporting policies) and any
formal announcements relating to Science Group’s financial
performance, review Science Group’s internal financial controls
and Science Group’s internal control and risk management
systems, and 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. The Group does not maintain
a separate internal audit function but the Group finance team
undertakes regular reviews of key controls and processes. 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 including at least one meeting without any
Executive Directors present.
Financial reporting and significant financial matters
In carrying out its duties, the Audit Committee is required to
assess whether suitable accounting policies have been adopted
and to challenge the robustness of significant management
judgements reflected in the financial results. This is performed
through discussions at Audit Committee meetings where the
Group Finance Director explains any changes to accounting
policies and describes any significant management judgements
made. In addition, the Audit Committee reviews the year end
Report to the Audit Committee from the external auditors which
details its work performed and findings from the annual audit.
During the year, the Audit Committee considered the following key
financial matters in relation to the Group’s financial statements
and disclosures, with input from the external auditor:
Going concern – The going concern assertion has a significant
impact on the basis of preparation of the financial statements.
The Audit Committee reviewed the business plan presented by
management for the financial year ending 31 December 2024
and considered the key assumptions made by management. The
Audit Committee challenged management on the assumptions
in the plan and consequently considered them appropriate. The
Audit Committee received the business plan cash flow which
covered the period to the end of June 2026 and considered the
associated assumptions, which were concluded to be appropriate.
The business plan also considered compliance with the banking
covenants.
The Group Finance Director performed a sensitivity analysis
to assess the amount of headroom available in the event of a
downside event occurring. The analysis considered the likelihood
of a scenario where covenants would be breached. The conclusion
was that the Group would continue to have sufficient cash
resources in order to meet its liabilities as they fall due.
Carrying value of goodwill and acquisition related intangible
assets – The value of the goodwill and acquisition related
intangible assets is supported by a value in use model prepared
by management. This is based on cash flows extracted from the
Group’s financial plan which has been approved by the Board.
The Group Finance Director communicated the key assumptions
within the value in use model and the Audit Committee concurred
with management’s conclusion that the carrying value of these
assets was fully supported.
Risk of fraud within revenue recognition – Revenue is the most
material balance in the Consolidated Income Statement and
accordingly there is a rebuttable presumption that there is a fraud
risk surrounding revenue. There is presumed to be an incentive
to manipulate revenue in a manner that inflates the group profit,
particularly around the year-end period. The risk is higher for
those businesses which undertake fixed price work, in particular
the CMS2 and TPG Services businesses.
Project managers carefully monitor the revenue recognised
against projects and are accountable for the progress of projects.
The Group Finance Director reviews the revenue recognised and
accrued income balances on a monthly basis and investigates any
unusual amounts recognised against projects. Collectively these
processes would identify any unwarranted revenue recognised.
No instances of fraudulent revenue recognition have been noted
from these monitoring procedures in the current year. In the
event of any significant issues arising the Group Finance Director
would raise with the Chair of the Audit Committee and the Board.
Whilst the Audit Committee is satisfied with management’s
response to the risk this incentive represents, the Committee
provides regular challenge to the Executive Directors. The
Audit Committee fully reviews the Auditor’s Report (particularly
in relation to revenue matters) and seeks to ensure that any
recommendations are quickly implemented and that subsequent
compliance is monitored.
27
26 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
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GOVERNANCE
Recoverability of investments in subsidiaries of Science Group
plc – The value of investments in subsidiaries is supported by a
value in use model prepared by management. This was based
on cash flows extracted from the Group’s financial plan which
has been approved by the Board. The Group Finance Director
communicated the key assumptions within the value in use
model and the Audit Committee concurred with management’s
conclusion that the carrying value of these assets was fully
supported.
Internal controls
In applying the principle that the Board should maintain a sound
system of internal control to safeguard shareholders’ investments
and Science Group’s assets, the Directors recognise that they have
overall responsibility for ensuring that Science Group 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 misstatement or loss. The system is designed to manage
rather than eliminate the risk of failure to achieve the business
objectives.
Science Group has established procedures necessary to
implement the guidance on internal control issued by the FRC
Guidance on Audit Committees 2014. 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 – Science Group is committed to high
standards of business conduct and seeks to maintain these
standards across all of its operations. There is a whistleblowing
policy in place for the reporting and resolution of suspected
fraudulent activities. There is a continual review of payment
processes, authorisation levels for expenditure, and awareness
raising of the risks of fraudulent activities. Science Group has
an appropriate organisational structure for planning, executing,
controlling and monitoring business operations in order to
achieve its objectives.
Risk identification – Corporate and operational managers are
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
operational/strategy reviews and annual plans. The Board actively
monitors performance against the financial 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 – Science Group 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, as far as reasonably practicable.
Monitoring and corrective action – There are 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 Group
Finance Director and Science Group’s auditors during 2024. No
internal audit function is operated outside of the systems and
processes in place as the Board considers that Science Group is
currently too small for a separate function, although this remains
under regular review. The Board considers the internal control
system to be appropriate for the Group.
Auditors
Grant Thornton UK LLP was reappointed at the AGM on 18 June
2024. The Audit Committee considers the independence of the
auditors as part of considering their annual reappointment.
During the year ended 31 December 2024, a Grant Thornton
International member firm in Hong Kong provided low value tax
compliance services to a subsidiary within the Group at a time
when Grant Thornton International should not have provided any
non-audit services. The Audit Committee is satisfied this was a
one-off incident and Grant Thornton is not currently providing any
other non-audit services.
Report of the Nomination Committee
The Nomination Committee is chaired by Martyn Ratcliffe and
comprises Martyn Ratcliffe, Peter Bertram and Susan Clement
Davies.
The Nomination Committee’s primary function is to make
recommendations to the Board on all new appointments and
reappointments and also to advise generally on issues relating
to Board composition and balance. The Committee seeks input
from all Directors regarding nominations for Board positions. All
Board appointments have to be ratified at a General Meeting of
the Company.
The Nomination Committee does not believe that it is appropriate
to set any specific targets with regards to diversity, including
gender. The Committee believes that the search for Board
candidates should be conducted, and appointments made,
on merit, against objective criteria but with due regard for the
benefits of diversity on the Board. Given the small size of the
Board and infrequency of Board appointments, the Company does
not have a fixed process for seeking new candidates. However,
where appropriate, this may include appointing an external search
agency to assist with recruitment.
For information on the Board’s performance evaluation process,
see the Board Committees section on page 25.
Report of the Audit Committee continued
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations. The Directors
consider that the Annual Report and financial statements, taken
as a whole, are fair, balanced and understandable, and provide
the information necessary for shareholders to assess the Group’s
position, performance, business model and strategy.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. As required
by the AIM Rules of the London Stock Exchange they are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (‘IFRS’) as adopted by
the UK and applicable law and have elected to prepare the parent
Company financial statements on the same basis.
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 of the Group and parent Company and
of their profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the Directors
are required to:
•
select suitable accounting policies and then apply them
consistently.
•
make judgements and estimates that are reasonable, relevant
and reliable.
•
state whether they have been prepared in accordance with
IFRS as adopted by the UK.
•
assess the Group and parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern.
•
use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to
cease operations, or have no realistic alternative but to do
so. The Directors confirm that they consider it appropriate to
adopt the going concern basis of accounting in preparing the
Annual Report and financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent Company and
enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal
control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report and a Directors’
Report that complies with that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK 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
21 March 2025 and signed on its behalf:
By order of the Board
Sarah Cole
Company Secretary
Harston Mill
Harston
Cambridge
CB22 7GG
29
28 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
GOVERNANCE
Independent auditor’s report to the members of Science Group plc
Our opinion on the financial statements is unmodified
We have audited the financial statements of Science Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended
31 December 2024, which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Changes in Shareholders’ Equity, Company Statement of Changes in Shareholders’ Equity, the Consolidated
and Company Balance Sheets, the Consolidated and Company Statements of Cash Flows and Notes to the Financial Statements,
including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and UK-adopted international accounting standards and, as regards the parent company financial statements, as applied
in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December
2024 and of the group’s profit for the year then ended;
•
the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
•
the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting
standards 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISA’ (UK)) and applicable law. Our responsibilities under
those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are
independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Other matters – Non-audit services provided by member forms
During the year ended 31 December 2024, a Grant Thornton International member firm in Hong Kong provided tax compliance services
in May to August 2024, to a non-significant controlled undertaking of the group, which are prohibited in accordance with the Financial
Reporting Council’s Ethical Standard. We identified these prohibited services through our audit procedures. Appropriate safeguards have
been put in place to mitigate the impact these prohibited services would have had on our independence, such that we could conclude that
these services were inconsequential to our audit of the group’s financial statements.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s
and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s
opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may
cause the group or the parent company to cease to continue as a going concern.
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of
accounting included:
•
obtaining and assessing management’s paper and assessment of going concern, including forecasts covering the period to 30 June 2026
and testing the mathematical accuracy of forecasts, as approved by the board;
•
performing arithmetical accuracy procedures on each of management’s forecast scenarios, including forecast liquidity and covenant
calculations;
•
assessing the robustness and accuracy of forecasts prepared by comparison to forecasts made in prior periods, including assessing
management’s historic ability to forecast, in light of our understanding of the group’s operations;
•
assessing the reasonableness of the key assumptions applied in management’s forecasts by comparing to external market data and
historic performance;
•
assessing forecast compliance with financial covenants within the group’s facilities for the period to 30 June 2026, and assessing the
headroom available to the group in the forecast period;
•
assessing reverse stress tests performed by management and determining if they are plausible;
•
considering post balance sheet events, and their impact on management’s forecast scenarios; and
•
assessing the appropriateness of disclosures in respect of going concern made in the financial statements.
Opinion
Our approach to the audit
Overview of our audit approach
Materiality
Key Audit
Matters
Scoping
Overall materiality:
Group: £744,000 which represents 5.0% of the group’s profit
before tax.
Parent company: £1,609,200, which represents 1.9% of the parent
company’s net assets.
Key audit matters were identified as:
•
Valuation of existing goodwill (group) and investments (parent
company) (same as previous year); and
•
Occurrence of revenue from fixed price over-time contracts in
Critical Maritime Systems & Support Limited (‘CMS2’) and TPG
Services Limited (‘TPG Services’) (same as previous year).
Our auditor’s report for the year ended 31 December 2023 included
one key audit matter that has not been reported as a key audit
matter in our current year’s report. This related to the valuation of
acquired intangibles arising from the TP Group acquisition in early
2023. Given the one-off nature of the transaction, we no longer
consider this to be a key audit matter.
We performed audits of the financial information of 4 components
using component performance materiality, and specified audit
procedures on the financial information of 7 components, to gain
sufficient appropriate audit evidence at group level.
This gives a coverage of 83% of the group’s total revenue, and 70% of
the group’s profit before tax.
We performed analytical procedures at group level using group
materiality for all 9 other components of the group.
The type of work performed on components changed from the
prior year. Due to changes in the composition of the group, we have
increased our scope on one component from analytical procedures
at group to specified audit procedures, and on one component from
specified audit procedures to an audit of the component’s financial
information.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent company’s
business model including effects arising from macro-economic uncertainties such as the conflicts in Ukraine and the Middle East, the recent
inflationary environment, and the impact of recent US government economic policies. We assessed and challenged the reasonableness of
estimates made by the directors and the related disclosures and analysed how those risks might affect the group’s and the parent company’s
financial resources or ability to continue operations over the going concern period.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
31
30 Annual Report and Financial Statements 2024
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GOVERNANCE
FINANCIAL STATEMENTS
GOVERNANCE
Independent auditor’s report to the members of Science Group plc continued
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those that had
the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
In the graph below, we have presented the key audit matters and
significant risks relevant to the audit. This is not a complete list of
all risks identified by our audit.
KAM
DESCRIPTION
AUDIT RESPONSE
DISCLOSURES
KEY OBSERVATIONS
OR OUR RESULTS
Occurrence of revenue from
fixed price over-time contracts
in CMS2 and TPG Services
Valuation of existing goodwill
(group) and investments (parent
company)
Management override
of controls
Occurrence of revenue
(notable items from data
analytics)
Potential financial statement impact
Extent of management judgement
Low
Key audit matter
Significant risk
High
Low
High
Key Audit Matter – Group and parent company
How our scope addressed the matter – Group and parent company
Valuation of existing goodwill (group) and investments
(parent company)
We identified the carrying value of goodwill, and the associated
investment value in the parent company, as one of the most
significant assessed risks of material misstatement due to fraud
and error.
We have pinpointed the significant risk in relation to the carrying
value of goodwill (group) and investment (parent company) to
the Frontier Smart Technologies CGU (‘Cash Generating Unit) and
the TPG Services CGU. There is an incentive and opportunity to
overstate the value of these CGUs due to their recent performance
and their significance to the group.
This is due to there being significant judgement and uncertainty in
management’s forecasted growth beyond 2024, and the headroom
over the carrying value of the CGUs being more sensitive to
changes in management’s assumptions regarding the future
performance of the CGUs.
Under International Accounting Standard (‘IAS’) 36 ‘Impairment
of Assets’, management is required to assess at the end of each
reporting period whether there is any indication that an asset may
be impaired and to perform an annual assessment whether the
group’s goodwill within a CGU is impaired.
The process for assessing whether impairment of assets exists
under IAS 36 is complex, and therefore required significant auditor
attention.
Management prepares models to calculate the value in use
through forecasting cash flows relating to each CGU, applying
an appropriate discount rate and, other assumptions. These are
all highly judgemental and can therefore be subject to error. The
selection of certain inputs into the cash flow forecasts can also
significantly impact the results of the impairment assessment.
In responding to the key audit matter, we performed the following
audit procedures:
•
Evaluated the design and implementation of relevant controls
around the process of preparing an impairment assessment by
performing a walkthrough;
•
Tested the accuracy of management’s forecasting through a
comparison of prior forecasts to actual data;
•
Obtained management’s assessment over carrying value and value
in use and assessed management’s identification of CGUs against
the requirements of IAS 36;
•
Assessed the mathematical accuracy of the impairment model and
the methodology applied by management for consistency with the
requirements of IAS 36;
•
Checked the consistency between the figures in the impairment
model to the consolidated budget evaluated as part of our work
performed on the going concern basis of preparation;
•
Challenged management on their methods and assumptions
including, but not limited to, short- and long-term growth rates,
future profitability, discount rates, and capital expenditure and
working capital assumptions, ensuring these are reasonable and
supported by data.
•
Engaged our internal valuations team (auditor experts) to challenge
the methodology and key assumptions used before forming an
opinion on the weighted average cost of capital (‘WACC’) rates and
long-term growth rates used in management’s model;
•
Assessed the actual performance of the CGUs between the
impairment assessment date and signing of the financial
statements to understand the consistency or otherwise between
post-assessment trading and management’s forecasts thereof;
•
Assessed the sensitivities applied by management, and performed
auditor sensitivities to understand the impact of any reasonably
possible change in assumptions and evaluate the headroom
available to assess whether goodwill or investment balances could
be impaired; and
•
Assessed the adequacy of the group’s disclosures, including a
review of the plausible downside scenarios shown at Note 14 &
16 with response to the carrying value of goodwill and investment
held in the parent company.
Relevant disclosures in the Annual Report and Accounts 2024
•
Financial statements: Note 2.7, Accounting policy – Goodwill;
and Note 14, Intangible assets
Our results
Our audit procedures did not identify any material misstatements
related to the valuation of existing goodwill (group) and investments
(parent company).
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32 Annual Report and Financial Statements 2024
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GOVERNANCE
Independent auditor’s report to the members of Science Group plc continued
Key Audit Matter – Group
How our scope addressed the matter – Group
Occurrence of revenue from fixed price over-time contracts in
CMS2 and TPG Services
We identified the occurrence of revenue arising from fixed price
over-time contracts in CMS2 and TPG Services as one of the most
significant assessed risks of material misstatement due to fraud
and error.
Under ISA (UK) 240 there is a rebuttable presumed risk that revenue
may be misstated due to the improper recognition of revenue.
Revenue in CMS2 and TPG Services from over-time contracts
totalled £33.4m in the period. We pinpointed the significant risk to
contracts which exhibited certain qualitative and quantitative risk
criteria.
Management continues to apply the provisions of ‘IFRS’ 15 ‘Revenue
from Contracts with Customers’. Revenue is recognised based on
stage of completion measured in reference to costs incurred as a
proportion of total costs (‘input method’). Stage of completion is
therefore based on actual costs incurred to date over estimated
costs to complete.
The estimation of costs to complete is inherently complex and
significant management judgment is required.
In responding to the key audit matter, we performed the following
audit procedures:
•
Assessed the design effectiveness of controls in respect of
revenue recognition by performing walkthroughs;
•
Obtained managements accounting papers for those identified
as high risk and review the revenue recognition against the
identified contract terms;
•
Performed substantive testing on those contracts assessing the
appropriateness of revenue recognised in the year;
•
Made inquiries of project managers to obtain an understanding
of the performance of the contract throughout the period and at
period end;
•
Obtained comfort over accuracy of management’s forecasting,
and completeness of forecast costs by:
–
Obtaining evidence of milestones being met and checking
whether costs to achieve milestone are in line with forecasts;
–
Inquiring with project managers - to assess current status
of open projects and to identify whether there have been
any significant changes in budget, and whether they expect
remaining costs to be in-line with forecasts post year-end.
–
Assessing post year-end costs incurred and updated
forecasts; and
–
Assessing the group’s historical forecasting accuracy by
comparing prior estimated costs to complete to actual costs
incurred and actual margin achieved when the contracts were
completed during the current period;
•
Assessed the treatment of liquidated damages, or similar
contract terms, for the sample of contracts reviewed to determine
whether any required constraint of variable consideration had
been applied;
•
Recalculate a sample of accrued and deferred income to
determine whether any revenue accruals and deferrals have been
appropriately made;
•
In addressing the significant risk on manipulation of project costs
we have performed a journals procedure to test the re-allocation
of costs between project codes;
•
Tested a sample of costs incurred to corroborative support such
as purchase orders, subcontractor agreements, good received
notes and purchase invoices, as appropriate, to determine if
these were valid project costs, allocated to the correct project,
and that the value of revenue recognised was therefore
appropriate in relation to the stage of completion; and
•
Assessed the accounting policy and adequacy of the disclosures
against the requirements of IFRS 15, and the disclosure made
in respect of key judgments and estimates involved in long term
contract accounting.
Relevant disclosures in the Annual Report
•
Financial statements: Note 2.18, Accounting Policy – Revenue
Recognition, Note 4 – Segment Information, Note 5 – Revenue
Our results
Our audit procedures did not identify any material misstatements
related to the occurrence of revenue from fixed price over-time
contracts in CMS2 and TPG Services.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on
the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent Company
Materiality for financial statements
as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic decisions
of the users of these financial statements. We use materiality in determining the nature, timing and
extent of our audit work.
Materiality threshold
£744,000 (2023: £619,000), which represents
5.0% (2023: 5.0%) of profit before tax.
£1,609,200 (2023: £557,100), which represents
1.9% (2023: 0.7%) of the parent company’s net
assets.
Significant judgements made by
auditor in determining materiality
In determining materiality, we made the
following significant judgements:
•
We have selected profit before tax as the
most appropriate benchmark because the
group is a commercially focused organisation
and profit before tax is a key financial
measure for the shareholders, and is a
generally accepted audit benchmark.
•
A performance-based measurement
percentage of 5.0% was chosen, which
reflects our knowledge of the business
from prior audits, and aligns with our firm’s
methodology.
Materiality for the current year is higher than
the level that we determined for the year ended
31 December 2023 to reflect the higher profit
before tax in the year.
In determining materiality, we made the
following significant judgements:
•
We have selected net assets as the most
appropriate benchmark as the parent
company is a non-trading entity, and holds
investments in other group trading entities.
•
1.9% was considered to be an appropriate
percentage based on our knowledge of the
business from prior year audits and aligns
with our firm’s methodology as applied in the
financial year under audit.
•
For group audit purposes, we capped
materiality at 55% of group materiality based
on the component’s significance within
the group, as the materiality based on net
assets was higher than group performance
materiality.
Performance materiality used to
drive the extent of our testing
We set performance materiality at an amount less than materiality for the financial statements as a
whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality threshold
£558,000 (2023: £433,300), which is 75% (2023:
70%) of financial statement materiality.
The range of component performance
materialities used across the group was
£279,000 to £391,000.
£1,206,750 (2023: £389,970), which is 75% (2023:
70%) of financial statement materiality. Parent
company component performance materiality
has been capped at an amount less than
group performance materiality for group audit
purposes.
Significant judgements made by
auditor in determining performance
materiality
In determining performance materiality, we
made the following significant judgements:
•
Whether there were any significant
adjustments made to the group financial
statements in prior years; and
•
Whether there were any significant control
deficiencies identified in prior years.
In determining component performance
materiality, we made the following significant
judgements:
•
Extent of disaggregation of financial
information across components, including
the relative risk and size of a component to
the group.
For each component in scope for our group
audit, we allocated a performance materiality
that is less than our overall group performance
materiality.
In determining performance materiality, we
made the following significant judgements:
•
Whether there were any significant
adjustments made to the group financial
statements in prior years; and
•
Whether there were any significant control
deficiencies identified in prior years.
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GOVERNANCE
Independent auditor’s report to the members of Science Group plc continued
Materiality measure
Group
Parent Company
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the financial
statements as a whole could reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific
materiality for the following areas:
•
Related party transactions; and
•
Directors’ remuneration
We determined a lower level of specific
materiality for the following areas:
•
Related party transactions; and;
•
Directors’ remuneration
Communication of misstatements
to the audit committee
We determine a threshold for reporting unadjusted differences to the audit committee.
Threshold for communication
£37,200 (2023: £30,950), which represents
5% of financial statement materiality, and
misstatements below that threshold that, in our
view, warrant reporting on qualitative grounds.
£80,500 (2023: £27,800), which represents
5% of financial statement materiality, and
misstatements below that threshold that, in our
view, warrant reporting on qualitative grounds.
The graph below illustrates how performance materiality and the range of component performance materiality interacts with our overall
materiality and the threshold for communication to the audit committee.
Overall materiality – Group
Overall materiality – Parent
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular matters
related to:
Understanding the group, its components, their environments, and its system of internal control including common controls
We obtained an understanding of the group and its environment, including group-wide controls and IT general controls; and assessed the
risks of material misstatement at a group level.
All financial reporting is based in the UK. Each division has an accounting function which reports to the divisional management in addition to
the group finance team.
In assessing the risk of material misstatement of the group financial statements, we considered the transactions undertaken by each entity
and therefore where the focus of our work was required.
Identifying components at which to perform audit procedures
We identified components at which to perform further audit procedures by considering:
•
components which included an individual risk of material misstatement to the group financial statements; this included considering the
nature of the individual components and circumstances during the period. Individual risks of material misstatement included, but were
not limited to, revenue recognition where revenue is recognised over time, occurrence and accuracy of revenue, valuation of goodwill
and management override of controls;
•
components which contained a nature and/or size of classes of transactions, account balances or disclosures which were deemed
material to the group opinion.
In addition, components were identified for further audit procedures to obtain sufficient appropriate audit evidence for significant classes of
transactions, account balances and disclosures, or for unpredictability.
Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters)
We performed audits of the component financial information for Sagentia Limited, Frontier Smart Technologies Limited, TPG Services Limited
and Critical Maritime Systems & Support Limited. These audits of component financial information included all of our audit work on the
identified key audit matters as described above.
Specified audit procedures were performed on the financial information of the following components: Science Group Plc, Quadro Epsom
Limited, Quadro Harston Limited, Leatherhead Research Limited, Technology Sciences Group Consulting Limited, Technology Sciences Group
Inc and Osprey Consulting Services Limited.
Analytical procedures were performed on the financial information of all other components using group materiality.
Performance of our audit
During our audit, all audit procedures over full-scope audits, specified audit procedures and analytical procedures, were performed by the
group engagement team, and the use of staff from Grant Thornton International Limited member firms to observe physical stock counts at
overseas locations. Onsite visits were made to United Kingdom based sites by the group engagement team throughout the audit process.
The group has a set of centralised controls, performed by the group finance team based in the UK. We have assessed the design and
implementation of group wide controls, acquiring corroborating evidence of the process. Additionally, we have obtained a sufficient
understanding of relevant controls over their consolidation process, and IT environment for in-scope components. All components subject to
audit procedures report in the UK.
Further audit procedures performed on components subject to specific scope and specified procedures may not have included testing of all
significant account balances of such components, but further audit procedures were performed on specific accounts within that component
that we, the group auditor, considered had the potential for the greatest impact on the group financial statements either due to risk, size or
coverage.
The components within the scope of further audit procedures accounted for the following percentages of the group’s results, including the
key audit matters identified:
Audit approach
No. of
components
% coverage
revenue
% coverage
PBT
Full-scope audit
4
68
24
Specific scope procedures
7
15
46
Full scope procedures and specific scope procedures coverage
11 (2023:11)
83 (2023: 86)
70 (2023: 80)
Analytical procedures
9 (2023: 10)
17 (2023: 14)
30 (2023: 20)
Total
20 (2023: 21)
100
100
Changes in approach from previous period
The approach to the audit has changed from the previous year. An audit of component financial information has been performed for Frontier
Smart Technologies Limited due to their share of revenue and profit before tax within the group. We have changed the level of our audit
procedures on Osprey Consulting Services Limited from analytical procedures performed at group level to specified audit procedures to
ensure sufficient testing coverage across the group. The scoping on TP Group Limited has changed from specified audit procedures to
analytical procedures performed at a group level as this component is no longer of a specific nature or size in the context of the group as
a whole. One component was dissolved in the year, reducing the number of components subject to analytical procedures performed at a
group level.
FSM: Financial statement materiality, PM: Performance materiality, RoPM: Range of performance materiality at 11 components,
TfC: Threshold for communication to the audit committee.
Profit before tax, 14,739,000
FSM £744,000, 5.0%
FSM
£744,000
FSM
£1,109,200
PM
£1,206,750
TfC
£80,500
PM
£588,000
TfC
£37,200
RoPM
£279,000 to
£391,000
Net Assets, £86,866,000
FSM £1,609,200, 1.9%
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36 Annual Report and Financial Statements 2024
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GOVERNANCE
FINANCIAL STATEMENTS
GOVERNANCE
Independent auditor’s report to the members of Science Group plc continued
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which 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 parent 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.
Corporate governance statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the group’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the
Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
•
the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified;
•
the directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why the period is
appropriate;
•
the director’s statement on whether they have a reasonable expectation that the group will be able to continue in operation and meet its
liabilities;
•
the directors’ statement on fair, balanced and understandable;
•
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks;
•
the section of the annual report that describes the review of the effectiveness of risk management and internal control systems; and
•
the section describing the work of the audit committee.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 29, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below:
•
We obtained an understanding of the legal and regulatory frameworks applicable to the parent company and the group and industry in
which they operate. We determined that the following laws and regulations were most significant: UK-adopted international accounting
standards, the Companies Act 2006, the UK Corporate Governance Code 2018 and the relevant tax compliance regulations in the
jurisdictions in which the group operates;
•
We inquired of management, the finance team, legal counsel and the board of directors about the group’s and parent company’s policies
and procedures relating to:
–
The identification, evaluation and compliance with laws and regulations;
–
The detection and response to risks of fraud; and
–
The establishment of internal controls to mitigate risks related to fraud or non-compliance with laws and regulations.
•
We obtained an understanding of the group’s policies and procedures implemented to prevent and detect non-compliance with laws
and regulations by inquiry of management, those responsible for legal and compliance procedures including the company secretary. We
corroborated our inquiries through our reading of board meeting minutes;
•
We assessed the susceptibility of the parent company’s and group’s financial statements to material misstatement, including how fraud
might occur. Audit procedures performed by the group engagement team;
–
identifying and assessing the design and implementation of controls management has in place to prevent and detect fraud and the
adequacy of procedures for authorisation of transactions and internal review procedures;
–
challenging assumptions and judgements made by management in its significant accounting estimates, including utilisation of
valuation specialists to review management’s impairment calculation; and
–
identifying and testing journal entries, in particular large or unusual journals
•
These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting
irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion,
deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations
is from events and transactions reflected in the financial statements, the less likely we would become aware of it;
•
It is the engagement partner’s assessment that the audit team collectively had the appropriate competence and capabilities to identify or
recognise non-compliance with laws and regulations based on understanding of, and practical experience with audit engagements of a
similar nature and complexity through appropriate training and participation;
•
We communicated relevant laws and regulations and potential fraud risks to all engagement team members and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout the audit. None of the matters relating to non-compliance
with laws and regulations were determined as key audit matters;
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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.
Stephen Osborne
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
21 March 2025
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38 Annual Report and Financial Statements 2024
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GOVERNANCE
FINANCIAL STATEMENTS
GOVERNANCE
FINANCIAL STATEMENTS
AND NOTES TO THE FINANCIAL STATEMENTS
41
Consolidated Income Statement
42
Consolidated Statement of Comprehensive Income
43
Consolidated Statement of Changes in Shareholders’ Equity
44
Company Statement of Changes in Shareholders’ Equity
45
Consolidated and Company Balance Sheet
47
Consolidated and Company Statement of Cash Flows
49
Notes to the Financial Statements
Group
Note
2024
£000
2023
£000
Revenue
5
110,669
113,341
Direct operating expenses
6
(65,491)
(67,090)
Sales and marketing expenses
(8,918)
(9,206)
Administrative expenses
(21,379)
(28,731)
Share of loss of equity-accounted investment
–
(169)
Adjusted operating profit
4
21,541
20,535
Acquisition integration costs
–
(518)
Amortisation of acquisition related intangible assets
14
(4,388)
(4,944)
Loss on remeasurement of equity-accounted investment
16
–
(4,762)
Share-based payment charge
8, 22
(2,272)
(1,997)
Share of loss of equity-accounted investment
–
(169)
Operating profit
14,881
8,145
Finance income
7
828
679
Finance costs
7
(970)
(1,205)
Profit before tax
14,739
7,619
Tax charge (net of R&D tax credit of £706,000 (2023: £517,000))
10
(2,719)
(2,095)
Profit for the year
12,020
5,524
Earnings per share
Earnings per share (basic)
12
26.5p
12.1p
Earnings per share (diluted)
12
26.0p
12.0p
The accompanying Notes on pages 49 to 97 form an integral part of this Consolidated Income Statement.
Consolidated Income Statement
For the year ended 31 December 2024
41
40
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Annual Report and Financial Statements 2024
Group
Share
capital
£000
Share
premium
£000
Treasury
shares
£000
Merger
reserve
£000
Translation
reserve
£000
Cashflow
hedge
reserve
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 January 2023
462
26,834
(2,193)
10,343
1,614
1,159
40,359
78,578
Contributions and distributions:
Purchase of own shares
–
–
(3,875)
–
–
–
–
(3,875)
Issue of shares out of treasury
–
–
3,138
–
–
–
(3,128)
10
Dividends paid (Note 13)
–
–
–
–
–
–
(2,259)
(2,259)
Share-based payment charge (Note 22)
–
–
–
–
–
–
1,997
1,997
Deferred tax charge on share-based payment
transactions
–
–
–
–
–
–
(467)
(467)
Transactions with owners
–
–
(737)
–
–
–
(3,857)
(4,594)
Profit for the year
–
–
–
–
–
–
5,524
5,524
Other comprehensive income/(expenses)
items that will or maybe reclassed to profit
or loss:
Fair value loss on financial instruments (Note 24)
–
–
–
–
–
(441)
–
(441)
Exchange differences on translating foreign
operations
–
–
–
–
(848)
–
–
(848)
Deferred tax credit on financial instruments
–
–
–
–
–
147
–
147
Total comprehensive (expenses)/income for
the year
–
–
–
–
(848)
(294)
5,524
4,382
Balance at 31 December 2023
462
26,834
(2,930)
10,343
766
865
42,026
78,366
Balance at 1 January 2024
462
26,834
(2,930)
10,343
766
865
42,026
78,366
Contributions and distributions:
Purchase of own shares
–
–
(4,959)
–
–
–
–
(4,959)
Issue of shares out of treasury
–
–
1,465
–
–
–
(1,462)
3
Dividends paid (Note 13)
–
–
–
–
–
–
(3,657)
(3,657)
Share-based payment charge (Note 22)
–
–
–
–
–
–
2,272
2,272
Deferred tax credit on share-based payment
transactions
–
–
–
–
–
–
262
262
Transactions with owners
–
–
(3,494)
–
–
–
(2,585)
(6,079)
Profit for the year
–
–
–
–
–
–
12,020
12,020
Other comprehensive income/(expenses)
items that will or maybe reclassed to profit
or loss:
Fair value loss on financial instruments (Note 24)
–
–
–
–
–
(416)
–
(416)
Exchange differences on translating foreign
operations
–
–
–
–
10
–
–
10
Deferred tax credit on financial instruments
–
–
–
–
–
104
–
104
Total comprehensive income/(expenses) for
the year
–
–
–
–
10
(312)
12,020
11,718
Balance at 31 December 2024
462
26,834
(6,424)
10,343
776
553
51,461
84,005
The accompanying Notes on pages 49 to 97 form an integral part of this Consolidated Statement of Changes in Shareholders’ Equity.
Group
Note
2024
£000
2023
£000
Profit for the year attributable to:
Equity holders of the parent
12,020
5,524
Profit for the year
12,020
5,524
Other comprehensive income/(expenses) items that will or may be reclassified to
profit or loss:
Exchange differences on translating foreign operations
10
(848)
Fair value loss on financial instruments
24
(416)
(441)
Deferred tax credit on financial instruments
11,24
104
147
Other comprehensive expense for the year
(302)
(1,142)
Total comprehensive income for the year attributable to:
Equity holders of the parent
11,718
4,382
Total comprehensive income for the year
11,718
4,382
The accompanying Notes on pages 49 to 97 form an integral part of this Consolidated Statement of Comprehensive Income.
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended 31 December 2024
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2024
43
42 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Company
Share
capital
£000
Share
premium
£000
Treasury
shares
£000
Merger
reserve
£000
Retained
earnings
£000
Total
equity
£000
Balance at 1 January 2023
462
26,834
(2,193)
10,343
42,651
78,097
Contributions and distributions:
Purchase of own shares
–
–
(3,875)
–
–
(3,875)
Issue of shares out of treasury
–
–
3,138
–
(3,128)
10
Dividends paid (Note 13)
–
–
–
–
(2,259)
(2,259)
Share-based payment charge (Note 22)
–
–
–
–
1,997
1,997
Transactions with owners
–
–
(737)
–
(3,390)
(4,127)
Profit and total comprehensive income for the year
–
–
–
–
6,096
6,096
Balance at 1 January 2024
462
26,834
(2,930)
10,343
45,357
80,066
Contributions and distributions:
Purchase of own shares
–
–
(4,959)
–
–
(4,959)
Issue of shares out of treasury
–
–
1,465
–
(1,462)
3
Dividends paid (Note 13)
–
–
–
–
(3,657)
(3,657)
Share-based payment charge (Note 22)
–
–
–
–
2,272
2,272
Transactions with owners
–
–
(3,494)
–
(2,847)
(6,341)
Profit and total comprehensive income for the year
–
–
–
–
13,141
13,141
Balance at 31 December 2024
462
26,834
(6,424)
10,343
55,651
86,866
The accompanying Notes on pages 49 to 97 form an integral part of this Company Statement of Changes in Shareholders’ Equity.
Distributable reserves at 31 December 2024 are £55.7 million (2023: £45.4 million).
Company Statement of Changes in Shareholders’ Equity
For the year ended 31 December 2024
Group
Company
Note
2024
£000
2023
£000
2024
£000
2023
£000
Assets
Non-current assets
Acquisition related intangible assets
14
21,496
25,845
–
–
Goodwill
14
18,942
18,878
–
–
Property, plant and equipment and right-of-use assets
15
25,002
25,856
306
29
Investments
16
–
–
78,102
75,830
Derivative financial instruments
24
627
886
–
–
Deferred tax assets
11
2,051
2,071
26
23
68,118
73,536
78,434
75,882
Current assets
Inventories
17
1,167
1,332
–
–
Trade and other receivables
18
27,786
23,315
5,646
9,902
Current tax assets
2,428
1,516
–
–
Derivative financial instruments
24
144
301
–
–
Cash and cash equivalents – Group cash
19
38,556
30,949
18,721
16,548
Cash and cash equivalents – Client registration funds
19
2,895
1,881
–
–
72,976
59,294
24,367
26,450
Total assets
141,094
132,830
102,801
102,332
Liabilities
Current liabilities
Trade and other payables
20
35,530
32,041
15,499
22,265
Current tax liabilities
599
379
–
–
Provisions
21
1,049
1,481
–
–
Borrowings
23
1,200
1,200
–
–
Lease liabilities
25
809
626
146
–
39,187
35,727
15,645
22,265
Consolidated and Company Balance Sheet
As at 31 December 2024
45
44 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Group
Company
Note
2024
£000
2023
£000
2024
£000
2023
£000
Non-current liabilities
Provisions
21
1,211
889
90
–
Borrowings
23
10,572
11,756
–
–
Lease liabilities
25
2,914
3,319
200
–
Deferred tax liabilities
11
3,205
2,773
–
–
17,902
18,737
290
–
Total liabilities
57,089
54,464
15,935
22,265
Net assets
84,005
78,366
86,866
80,067
Shareholders’ equity
Share capital
22
462
462
462
462
Share premium
26,834
26,834
26,834
26,834
Treasury shares
(6,424)
(2,930)
(6,424)
(2,930)
Merger reserve
10,343
10,343
10,343
10,343
Translation reserve
776
766
–
–
Cash flow hedge reserve
24
553
865
–
–
Retained earnings
51,461
42,026
55,651
45,357
Total equity
84,005
78,366
86,866
80,066
The Company’s profit for the year was £13,141,000 (2023: £6,096,000).
The Financial Statements were approved by the Board of Directors and signed on its behalf by:
Martyn Ratcliffe
Executive Chair
Jon Brett
Finance Director
On 21 March 2025
The accompanying Notes on pages 49 to 97 form an integral part of this Consolidated and Company Balance Sheet.
The Company’s registered number is 06536543.
Consolidated and Company Balance Sheet continued
As at 31 December 2024
Group
Company
Note
2024
£000
2023
£000
2024
£000
2023
£000
Profit before income tax
14,739
7,619
13,137
6,096
Adjustments for:
Share of loss of equity-accounted investment
16
–
169
–
169
Loss on remeasurement of equity-accounted investee
–
4,762
–
4,762
Amortisation of acquisition related intangible assets
14
4,388
4,944
–
–
Depreciation of property, plant and equipment
15
528
694
–
–
Depreciation of right-of-use assets
15
865
1,053
131
114
Bank charges on derivative financial instruments
211
422
–
–
Net interest costs
7
142
526
334
564
Share-based payment charge
8
2,272
1,997
–
–
Decrease in inventories
165
1,222
–
–
(Increase)/decrease in receivables
(4,552)
(2,019)
4,384
(5,604)
Increase/(decrease) in payables representing client
registration funds
1,014
(986)
–
–
Increase/(decrease) in payables excluding balances
representing client registration funds*
2,247
(10,760)
(7,378)
(6,174)
(Decrease)/increase in provisions
(183)
662
–
–
Cash generated from operations
21,836
10,305
10,608
(73)
Interest paid
(870)
(1,106)
(294)
(273)
UK corporation tax paid
(1,930)
(962)
–
–
Foreign corporation tax paid
(560)
(325)
–
–
Cash flows from operating activities
18,476
7,912
10,314
(346)
Interest received
723
583
533
372
Purchase of property, plant and equipment
15
–
(80)
–
–
Purchase of subsidiary undertakings, net of cash and
borrowing acquired
–
(13,923)
–
(12,409)
Sale of subsidiary, net of cash sold
–
638
–
–
Cash flows used in investing activities
723
(12,782)
533
(12,037)
*FY23 includes transaction costs associated with the acquisition of TP Group plc.
Consolidated and Company Statement of Cash Flows
For the year ended 31 December 2024
47
46 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Group
Company
Note
2024
£000
2023
£000
2024
£000
2023
£000
Issue of shares out of treasury
3
10
3
10
Repurchase of own shares
(4,959)
(3,875)
(4,959)
(3,875)
Dividends paid
13
(3,657)
(2,259)
(3,657)
(2,259)
Purchase of derivative financial instruments
(211)
(250)
–
–
Repayment of term loan
23
(1,200)
(1,200)
–
–
Principal elements of lease payments
25
(693)
(912)
(61)
(147)
Cash flows from financing activities
(10,717)
(8,486)
(8,674)
(6,271)
Increase/(decrease) in cash and cash equivalents in the year
8,482
(13,356)
2,173
(18,654)
Cash and cash equivalents at the beginning of the year
32,830
46,512
16,548
35,202
Exchange gain/(loss) on cash
139
(326)
–
–
Cash and cash equivalents at the end of the year
19
41,451
32,830
18,721
16,548
The accompanying Notes on pages 49 to 97 form an integral part of this Consolidated and Company Statement of Cash Flows.
Consolidated and Company Statement of Cash Flows continued
For the year ended 31 December 2024
1. General information
Science Group plc (the ‘Company’) together with its subsidiaries (‘Science Group’ or the ‘Group’) is an international science & technology
consultancy and systems organisation. The Group and Company Financial Statements of Science Group plc were prepared under the
International Financial Reporting Standards (‘IFRS’) as adopted by the UK in conformity with the requirements of the Companies Act 2006 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
Alternative Investment Market of the London Stock Exchange (SAG.L). The value of Science Group plc shares, as quoted on the London Stock
Exchange on 31 December 2024, was 453.0 pence per share (31 December 2023: 392.0 pence per share).
These Consolidated Financial Statements have been approved for issue by the Board of Directors on 21 March 2025.
Alternative performance measures (APM)
The Group uses alternative non-Generally Accepted Accounting Principles performance measures which are not defined within IFRS and
may not be comparable across companies, as management believe these measures enable management and stakeholders to assess
the underlying trading performance of the business as they exclude certain items that are considered to be significant in nature and/or
quantum.
The APMs are consistent with how the businesses’ performance is planned and reported within the internal management reporting to the
Board. The appropriateness of the APMs are kept under review by the Audit Committee. The key APMs that the Group uses and explanations
on how they are calculated are set out below:
(a) Adjusted Operating Profit
The Group calculates this measure by adjusting to exclude certain items from operating profit namely: amortisation of acquisition related
intangible assets, acquisition integration costs, share-based payment charges and other specified items that meet the criteria to be adjusted.
The criteria for the adjusted items in the calculation of adjusted operating profit is operating income or expenses that are material and
either arise from an irregular and significant event or the income/cost is recognised in a pattern that is unrelated to the resulting operational
performance. Materiality is defined as an amount which would reasonably be expected to influence the economic decisions of the users
of these financial statements. Acquisition integration costs include all costs incurred directly related to the restructuring, relocation and
integration of acquired businesses. Adjustments for share-based payment charges occur because: once the cost has been calculated, the
Directors cannot influence the share-based payment charge incurred in subsequent years; it is understood that many investors/analysts
exclude the cost from their valuation analysis of the business; and the value of the share option to the employee differs considerably in value
and timing from the actual cash cost to the Group.
The calculation of this measure is shown on the Consolidated Income Statement.
(b) Adjusted Earnings Per Share
The Group calculates this measure by dividing adjusted profit after tax by the weighted average number of shares in issue and the
calculation of this measure is disclosed in Note 12. The tax rate applied to calculate the tax charge in this measure is the tax at the blended
corporation tax rate across the various jurisdictions for the year which is 23.3% (2023: 24.1%) which results in a comparable tax charge year
on year.
(c) Net Funds
The Group calculates this measure as the net of cash and cash equivalents – Group cash and Borrowings. Client registration funds are
excluded from this calculation because these monies are for the purpose of payment of registration fees to regulatory bodies. This cash is
separately identified for reporting purposes and is unrestricted. This measure is calculated as follows:
Group
Note
2024
£000
2023
£000
Cash and cash equivalents – Group cash
19
38,556
30,949
Borrowings
23
(11,772)
(12,956)
Net funds
26,784
17,993
The Directors believe that disclosing these alternative performance measures enhances shareholders’ ability to evaluate and analyse the
underlying financial performance of the Group. Specifically, the adjusted operating profit measure is used internally in order to assess
the underlying operational performance of the Group, aid financial, operational and commercial decisions and in determining employee
compensation. The adjusted EPS measure allows the shareholder to understand the underlying value generated by the Group on a per
share basis. Net funds represent the Group’s cash available for day-to-day operations and investments. As such, the Board considers these
measures to enhance shareholders’ understanding of the Group results and should be considered alongside the IFRS measures.
Notes to the Financial Statements
For the year ended 31 December 2024
49
48 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
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 and Company financial statements of Science Group have been prepared under the historical cost convention, as modified
by the revaluation of certain financial instruments at fair value. The financial statements are prepared under IFRS as adopted by the UK in
conformity with the requirements of the Companies Act 2006.
Of the new standards and interpretations effective for the year ended 31 December 2024, there was no impact on the presentation of the
financial statements of Science Group.
As set out in the Climate-Related Financial Disclosures the climate-related risks and opportunities and exposure faced by the Group at
the lower end of scale. These risks and opportunities have been considered as part of the Directors’ assessment of going concern and
impairment and are not considered to be material risks.
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 £13,141,000 (2023: £6,096,000).
Going concern
The Directors have undertaken a comprehensive going concern review. In adopting the going concern basis for preparing these
Consolidated Financial Statements, the Directors have undertaken a review of the Group’s cash flows forecasts and available liquidity,
along with consideration of the principal risks and uncertainties over an 18-month period to September 2026. Recognising the challenges
of reliably estimating and forecasting the impact of external factors on the Group, the Directors have considered two forecasts in the
assessment of going concern, along with a likelihood assessment of these forecasts being:
•
Base case, which reflects the Directors’ current expectations of future trading; and
•
Severe but plausible downside forecast which envisages a ‘stress’ or ‘downside’ situation.
For the severe but plausible downside forecast the assumptions include:
•
A revenue reduction of 20% across all businesses (although due to diversification this is highly unlikely)
•
A more limited reduction in the costs
•
A reduction of discretionary bonuses across the Group
After reviewing the current liquidity position and the cash flow forecasts modelled under both the base case and stressed downside, the
Directors consider that the Group has sufficient liquidity to continue in operational existence for a period of at least 18 months from the date
of this report and are satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the Consolidated Financial
Statements.
In reaching these conclusions the Directors noted that the Group had a cash balance at 31 December 2024 of £38.6 million (excluding client
registration funds) and net funds of £26.8 million, together with the undrawn Revolving Credit Facility (‘RCF’) of £25.0 million.
On 19 March 2025 the Group announced it had agreed new banking facilities with Lloyds Bank plc. The existing Term Loan and RCF
were scheduled to expire in September 2026 and December 2026 respectively. There are two new Term Loans for a combined value of
£12.0 million, each for 10 years expiring in March 2035. Each loan is secured solely and individually against the Group’s freehold properties:
one loan to the property in Harston, near Cambridge, and, a second, independent loan to the property in Epsom, Surrey. The new, increased
RCF is for £30.0 million, for a period of 5 years expiring in March 2030, an increase of £5.0 million over the 2021 RCF. The RCF also has a
£10.0 million accordion, a further increase of £5.0 million over the 2021 RCF. The RCF is currently undrawn and therefore no covenants apply.
2.2 Changes in accounting policies
The accounting pronouncements which have become effective from 1 January 2024 and have therefore been adopted do not have a
significant impact on the Group’s financial results or position.
2.3 Standards, IFRICs and other guidance applicable
Standards and IFRICs newly applicable for companies with 31 December 2024 year ends are set out below, together with any noted impact
on the Group.
Number
Title
Impact in year
IAS 1 (amendments)
Non-current liabilities with covenants
No material impact
IAS 1 (amendments)
Classification of liabilities as current or non-current
No material impact
IFRS 16 (amendments)
Lease liability in a sale and leaseback
No material impact
IAS 7 & IFRS 7 (amendments)
Supplier finance arrangements
No material impact
2.4 Standards issued but not yet effective
At the date of authorisation of these Consolidated Financial Statements, several new, but not yet effective, Standards and amendments to
existing Standards, and Interpretations have been published by the IASB or are awaiting endorsement by the UK Endorsement Board. None
of these Standards nor amendments to existing Standards have been adopted early by the Group.
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the
pronouncement. New Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not
expected to have a material impact on the Group’s Financial Statements.
Number
Title
Effective
IAS 21 (amendments)
Lack of exchangeability
1 Jan 25
IFRS 9 and IFRS 7 (amendments)
Classification and measurement of financial instruments
1 Jan 26
IFRS 18
Presentation and disclosures in financial statements
1 Jan 27
IFRS 19
Subsidiaries without public accountability disclosures
1 Jan 27
2.5 Basis of consolidation
The basis of consolidation is set out below:
Subsidiaries – subsidiaries are entities controlled by Science Group. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on
which control ceases.
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 IFRS 3
Business Combinations are recognised at their fair value at the acquisition date. Acquisition expenses are expensed as incurred.
Interests in equity-accounted investees – Associates are those entities in which the Group has significant influence, but not control or
joint control, over the financial and operating policies. Interests in associates are accounted for using the equity method. They are initially
recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the
Group’s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant
influence ceases. The carrying value of the associate investment would not be impaired to the extent it is exceeded by the share of
accumulated losses in associate.
2.6 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 (‘CODMs’), being the Executive Board. The CODMs monitor the performance of these
operating segments as well as deciding on the allocation of resources to them.
The Group results are presented across 4 reporting Segments, determined by management based on the nature of the products and
services provided: Consultancy Services, Systems – Submarine Atmosphere Management, Systems – Audio Chips and Modules, and Freehold
Properties. Corporate costs, including the PLC costs and one-off costs relating to M&A activity, are not allocated to the Segments and are
reported separately. This provides transparency and facilitates shareholder analysis of the component parts of the Group.
The Consultancy Services Segment comprises the Research & Development, Regulatory & Compliance and Defence & Aerospace Practices.
The Systems Businesses comprises Submarine Atmosphere Management (Critical Maritime Systems & Support (‘CMS2’)), which designs,
develops and manufactures submarine atmosphere systems for the Defence sector; and, Audit Chips and Modules (Frontier Smart
Technologies (‘Frontier’)), which is a provider of DAB/DAB+ radio semi-conductors/modules.
2.7 Intangible assets
All intangible assets, except goodwill, are stated at cost less accumulated amortisation and any accumulated impairment losses.
Goodwill – 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.
51
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FINANCIAL STATEMENTS
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FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
2.7 Intangible assets
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 acquired intangible assets,
customer contracts and relationships are between 5 and 12 years. The assets are assessed on an annual basis for impairment and amortised
over its remaining economic useful life. See Note 14 for further details.
2.8 Research and development expenditure
Expenditure on research activities is recognised in profit or loss as incurred.
Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete
development and to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition,
development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.
Any tax credit receivable under either the R&D Expenditure Credit scheme (‘RDEC’) or the Small or Medium-sized (‘SME’) scheme is treated
as a taxable credit and included in the Group’s taxable income in accordance with IAS 12 Income Taxes. The credit is first used to offset the
Group’s corporation tax liability for the same accounting period. After accounting for tax, the net benefit of the RDEC or SME schemes is
recognised in the tax line.
2.9 Property, plant and equipment
Land and buildings as shown in the Notes to the Financial Statements comprise offices and laboratories at Harston Mill, Harston, Cambridge,
UK and at Great Burgh, Epsom, 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.
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 Science Group 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.
Land is not depreciated. Depreciation on all other property, plant and equipment is calculated using the straight-line method to allocate their
cost less their residual values over their estimated useful lives, as follows:
Buildings
25 years
Furniture and fittings
3-5 years
Equipment
3 years
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.
2.10 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term highly liquid investments (maturing
not greater than 3 months) from the date of acquisition that are readily convertible into known amounts of cash which are subject to an
insignificant risk of changes in value. Bank overdrafts are included in liabilities.
2.11 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs includes all cost incurred in bringing each product to its present
location and condition, which comprises the cost of direct materials and third party charges. Net realisable value is the estimated selling
price in the ordinary course of business less any applicable selling expenses.
2.12 Trade and other receivables
Trade and other receivables are carried at original invoice amount and are subsequently held at amortised cost less provision for
impairment. The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and
records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial instrument. The Group uses its historical experience, external indicators and
forward-looking information to calculate the expected credit losses. The movement in the provision is recognised in the Consolidated Income
Statement.
2.13 Trade and other payables
Trade and other payables are initially recognised at original invoice amount or transaction price and subsequently measured at amortised
cost using the effective interest method.
2.14 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably,
and it is probable that an outflow of economic benefits will be required to settle the obligation.
Dilapidation provisions are recognised when the Group has an obligation to rectify, remove improvements, repair or reinstate the leased
premises to a certain condition in accordance with the lease agreement. The provision is measured at the present value of the estimated cost
of rectifying, repairing, or reinstating the leased premises at a specified future date.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
2.15 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.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12
months after the balance sheet date.
2.16 Financial instruments
(a) Classification
The Group classifies its financial assets in the following measurement categories:
(i)
those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
(ii)
those to be measured at amortised cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments
in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are
not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for
the equity investment at fair value through other comprehensive income.
(b) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at
fair value through profit or loss are expensed in profit or loss.
(c) Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised
cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade
receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from
initial recognition of the receivables. The Group recognises loss allowances for expected credit losses (‘ECLs’) on financial assets measured at
amortised cost, debt investments measured at FVOCI and contract assets (as defined in IFRS 15).
The Group measures loss allowances at an amount equal to lifetime ECL, except for other debt securities and bank balances for which credit
risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition,
which are measured as 12-month ECL. Loss allowances for trade receivables and contract assets are always measured at an amount equal to
lifetime ECL.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL,
the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and
including forward-looking information.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit
impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of
the financial asset have occurred.
Write-offs
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of
recovery.
(d) Derivative financial instruments and hedge accounting
Derivative financial instruments are accounted for at fair value through profit or loss except for derivatives designated as hedging
instruments in cash flow hedge relationships, which require a specific accounting treatment. To qualify for hedge accounting, the hedging
relationship must meet all of the following requirements:
•
there is an economic relationship between the hedged item and the hedging instrument,
•
the effect of credit risk does not dominate the value changes that result from that economic relationship,
•
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually
hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item, and
•
At inception, there is formal designation and documentation of the hedging relationship.
The Group has entered into currency exchange instruments which have been designated as hedging instruments in cash flow hedge
relationships. These arrangements have been entered into to mitigate foreign currency exchange risk arising from certain highly probable
sales transactions denominated in foreign currency.
2. Summary of significant accounting policies continued
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FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
2.16 Financial instruments continued
(d) Derivative financial instruments and hedge accounting continued
In order to address interest rate risk, the Group has entered into phased interest rate swaps in order to fully hedge the loan borrowings. The
interest rate swaps have been designated as hedging instruments in cash flow hedge relationships because the critical terms of the interest
rate swaps entered exactly match the terms of the hedged item.
All derivative financial instruments used for hedge accounting are recognised initially at fair value and reported subsequently at fair value in
the Consolidated Balance Sheet.
To the extent that the hedge is effective, changes in the fair value of derivatives designated as hedging instruments in cash flow hedges
are recognised in other comprehensive income and included within the cash flow hedge reserve in equity. Any ineffectiveness in the hedge
relationship is recognised immediately in profit or loss.
At the time the hedged item affects profit or loss, any gain or loss previously recognised in other comprehensive income is reclassified from
equity to profit or loss and presented as a reclassification adjustment within other comprehensive income. However, if a non-financial asset
or liability is recognised as a result of the hedged transaction, the gains and losses previously recognised in other comprehensive income are
included in the initial measurement of the hedged item. In the event that the currency exchange instrument is exercised in any month the
gain is recognised as revenue.
If a forecast transaction is no longer expected to occur, any related gain or loss recognised in other comprehensive income is transferred
immediately to profit or loss. If the hedging relationship ceases to meet the effectiveness conditions, hedge accounting is discontinued and
the related gain or loss is held in the equity reserve until the forecast transaction occurs.
2.17 Equity
Equity comprises the following:
Share capital represents the nominal value of equity shares net of incremental costs directly attributable to the issue of new shares or
options, net of tax.
Share premium represents the excess over nominal value of the fair value of consideration received for equity shares net of expenses of the
share issue.
Treasury shares represent Company shares purchased directly by the Company to satisfy obligations under employee share incentive
obligations.
Merger reserve is a reserve which reflects historical business combinations where merger relief was obtained.
Translation reserve represents the foreign currency differences arising on translating foreign operations into the presentational currency of
the Group.
Cash flow hedge reserve represents the outstanding notional amount of cash flow hedges, net of deferred tax, at the balance sheet date.
Retained earnings represent retained profits.
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, including settlement of employee share
incentive obligations, 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. The credit for proceeds received is restricted to the purchase
price of the treasury shares with the difference between prices paid for treasury shares and proceeds received taken to share premium.
Where such shares are subsequently cancelled, the movement is recognised directly in equity with no gain or loss recognised in profit
or loss.
2.18 Revenue recognition
The Group’s revenue arises from the following segments:
Consultancy Services comprises the Research & Development, Regulatory & Compliance and Defence & Aerospace Practices.
Systems – Submarine Atmosphere Management comprises the Critical Maritime Systems & Support (‘CMS2’) Business, which designs,
develops and manufactures submarine atmosphere systems for the Defence sector; and
Systems – Audio Chips and Modules comprises the Frontier Business, which is a provider of DAB/DAB+ radio semi-conductors/modules.
To determine whether to recognise revenue, the Group follows a 5-step process:
1
Identifying the contract with a customer
2
Identifying the performance obligations
3
Determining the transaction price
4
Allocating the transaction price to the performance obligations
5
Recognising revenue when/as performance obligation(s) are satisfied.
(a) Consultancy Services
The Group has consultancy services contracts with clients. For each contract, performance obligations are identified, and the contract is
assessed to be either a time and materials or a fixed price basis contract.
Consultancy Services (Time and Materials contracts)
Revenue from providing consultancy services on a time and materials basis is recognised as the services are provided, on the basis of time
worked at an hourly or daily rate and as expenses for materials are incurred.
Estimates of revenues or extent of progress toward completion are reviewed regularly and, where necessary, revised. Any resulting increases
or decreases in estimated revenues are reflected in profit or loss in the period in which the circumstances that give rise to the revision
become known by management.
The customer pays for the value of services provided based on an invoicing and payment schedule. If the services rendered by the Group at
the reporting date exceed the payments received to date, an asset is recognised, within:
•
trade receivables, if the sales invoice has been raised and an unconditional right to receive consideration exists;
•
unbilled invoices on contracts, if the services rendered have not been invoiced but where an unconditional right to receive consideration
exists;
•
amounts recoverable on contract if the services rendered have not been invoiced and no unconditional right to receive consideration
exists.
Consultancy Services (Fixed Price contracts)
The Group provides fixed price regulatory and compliance services to US customers, to support in the renewal of licenses and product
registrations with US state regulatory authorities. Customers simultaneously receive and consume the benefits provided by each individual
renewal. Revenue from these contracts is recognised using an output method based on the number of renewals completed and submitted
during the reporting period based on the average revenue per renewal.
The Group receives cash from clients which are pass through funds solely for the purpose of payment of registration fees to regulatory
bodies and for which no revenue is recognised.
Where the contract is advisory, technical or project management, the customer receives and consumes the benefits of the service as the
Group performs. Revenue is recognised overtime, using an input basis, based on costs incurred compared to total contract costs. Costs are
only included in the measurement of progress towards satisfying the performance obligation where there is a direct relationship between
the input and the satisfaction of the performance obligation.
For contracts where the Group becomes entitled to invoice customers based on achieving a series of performance related milestones, at the
point a customer is invoiced, any amount previously recognised as amounts due from contract customers is reclassified to trade receivables.
If the milestone payment exceeds the revenue recognised to date under the cost-to-cost method, then the Group recognises a contract
liability for the difference. There is not considered to be any significant financing components as the period between recognition of revenue
and milestone payment is always less than one year.
(b) Design and Manufacture of Submarine Atmosphere Systems
The Group’s operations generate revenues through both the design and manufacture of submarine atmosphere systems.
The Group determines the transaction price based on the consideration to which the Group expects to be entitled in a contract with a
customer. Where the amount of consideration is variable (e.g. due to trade discounts, late delivery penalties and other similar items) the
Group includes the variable consideration in the transaction price only to the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur.
The Group recognises revenue when it transfers control of a product or service to a customer as more fully explained below.
The Group designs and manufactures mission-critical systems under long-term contracts with customers. The promises in these contracts
include the design and manufacture of systems for delivery to the customer and standard assurance warranties. The promises in these
contracts are combined as a single performance obligation because the customer cannot benefit from the promises on their own, and
they are not separately identifiable in the context of the contract. In some instances, the contract will also include a promise to install the
equipment at the customer site. Where installation is included in the contract, this is not generally considered a separate performance
obligation as the promise is not separately identifiable in the context of the contract.
On inception of each contract, the Group assesses whether ongoing contractual obligations represent a distinct performance obligation.
If the performance obligation is considered distinct e.g. relates to the delivery of more than one main system to separate boats, each main
system for each separate boat is treated as a separate performance obligation and revenue recognised under a separate Project Code.
Where it is multiple systems for a single boat, this is considered to be a single performance obligation and revenue is recognised under a
single Project Code.
The systems that are designed and manufactured are bespoke for each customer and do not have an alternative use to the Group.
Over time revenue recognition
For fixed price contracts within this category, where the Group has an enforceable right to payment for performance completed to date,
being recovery of costs incurred in satisfying the performance obligation plus a reasonable profit margin, the performance obligation is
satisfied over time. The measurement of progress towards complete satisfaction of the performance obligation is measured using the input
method, based on costs incurred compared to total contract costs.
2. Summary of significant accounting policies continued
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Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
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GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
2.18 Revenue recognition continued
(b) Design and Manufacture of Submarine Atmosphere Systems continued
For contracts billed on a time-and-materials basis, the measurement of progress towards complete satisfaction of the performance
obligation is measured using the output method (consistent with the time and materials incurred). Under IFRS15.B16, the Group recognises
revenue in line with amounts it has the right to invoice. See Note 28 for critical accounting estimates and judgements in relation to certain
contracts within this category.
Costs are only included in the measurement of progress towards satisfying the performance obligation where there is a direct relationship
between the input and the satisfaction of the performance obligation. Full costs to complete, including Labour and material costs are
considered the most faithful depiction of progress as this most accurately reflects the value provided to the customer. The Group designs
and manufactures bespoke systems with the time allocated to projects of engineers and technicians, as well as bespoke materials procured
from suppliers which can take a number of months to be manufactured and delivered to the Group.
The Group does not incur costs in respect of the components whilst they are being manufactured by the supplier. It is only once the goods
are delivered and accepted by the Group that costs associated with the materials are incurred and revenue is recognised. Where payments
on account are made to the supplier which are in nature milestone payments, these are not considered to be reflective of costs incurred to
date by the supplier in the manufacturing of the components. Material costs are recognised at an amount equal to the cost of the good used
to satisfy the performance obligation.
For contracts where the Group becomes entitled to invoice customers based on achieving a series of performance related milestones, at the
point a customer is invoiced, any amount previously recognised as amounts due from contract customers is reclassified to trade receivables.
If the milestone payment exceeds the revenue recognised to date under the cost-to-cost method, then the Group recognises a contract
liability for the difference.
There is not considered to be any significant financing components as the period between recognition of revenue and milestone payment is
always less than one year.
Point in time revenue recognition
For contracts where the Group does not have an enforceable right to payment for performance completed to date, being recovery of
costs incurred in satisfying the performance obligation plus a reasonable profit margin, revenue is recognised at a point in time. For these
contracts, revenue is recognised at the point of customer delivery (as defined in each specific contract) of the system, as this is the point at
which the customer is in control of the deliverable, has the risks and rewards of ownership and the Group has a present right for payment for
the deliverable.
Some contracts will include:
•
a promise to store the equipment or an option to purchase storage services at a future date. Storage services are provided in the period
between acceptance of the equipment by the customer and shipping. Where storage services are provided, this is considered a separate
performance obligation, and/or
•
extended service warranties which are a separate performance obligation.
For storage services, the customer receives and consumes the benefit over the storage period. The performance obligation is satisfied over
time. Revenue is recognised on an output basis, based on daily rate for the period of storage.
For extended warranties, the customer receives and consumes the benefit of the warranty over the extended warranty period. The
performance obligation is satisfied over time, based on straight line recognition over the period of the warranty, which is used to measure
progress towards complete satisfaction of the extended warranty performance obligation.
For the supply of consumables, the customer receives the benefit of the service on delivery (as defined in the contract) of the consumable.
This is the point at which the customer is in control of the deliverable, has the risks and rewards of ownership and the Group has a present
right for payment for the deliverable. Where the Group resells consumables products to customers an assessment is made as to whether the
Group is acting as a principal or agent.
There have been no situations identified, based on these assessments, where the directors have concluded the Group is acting as an agent
rather than a principal based on the following indicators:
•
the Group has control of the goods prior to them being transferred to the customer,
•
the Group is deemed to have control where the Group holds the responsibility of designing and manufacturing the items and is
therefore primarily responsible for fulfilling the promise to provide the goods,
•
the Group holds the inventory risk before goods are transferred to the customer,
•
the Group has discretion in establishing the price for the goods.
Payment terms under these contracts are typically 30 days.
Parts management – The Group has a parts management contract, whereby the Group manages the parts supply chain for a customer. This
contract contains two performance obligations being asset availability, and supply of consumables.
In terms of asset availability, the Group’s performance does not create an asset with an alternative use to the Group and the Group has an
enforceable right to payment for performance completed to date, being recovery of costs incurred in satisfying the performance obligation
plus a reasonable profit margin. The customer also simultaneously receives and consumes the benefits of the asset availability service as
the Group performs. Revenue is recognised as a provision of assets are provided and control passes to the customer on the sale of the
goods. Where it is concluded that the customer has material rights under the contract for asset availability service then this will be assessed
in measuring progress towards complete satisfaction of the performance obligation that depicts the Group’s performance in providing the
asset availability service to the customer.
The contract price for asset availability includes variable consideration in the form of rebates based on achievement of KPI’s within the
contract. The expected value approach, which is based on the sum of probability weighted amounts for a range of possible outcomes, has
been used to estimate the transaction price. The variable consideration is trued up at the end of each reporting period to reflect changes in
the period and conditions that exist at the period end.
For the supply of consumables, revenue is recognised at a point in time because the customer receives the benefit of the service on delivery
(as defined in the contract) of the consumable. This is the point at which the customer is in control of the deliverable, has the risks and
rewards of ownership and the Company has a present right for payment for the deliverable.
Payment terms under these contracts are typically 30 days.
Maintenance of equipment – The Group has contracts for the maintenance and servicing of customer vessels with a 12-month assurance
warranty. These contracts contain a single promise and performance obligation. These assurance-type warranties are not considered to be
performance obligations, so revenue is not allocated to them. The estimated costs of serving these warranties are recognised as provisions
under IAS 37 ’Provisions, Contingent Liabilities and Contingent Assets’.
The performance of the Group enhances the vessels, which are controlled by the customer, as the Group performs. Customers
simultaneously receive and consume the benefits of the enhancements. Revenue is recognised over time. The Group uses an input method,
based on labour hours, costs incurred and materials, to measure complete satisfaction of the performance obligation. Costs are only
included in the measurement of progress towards satisfying the performance obligation where there is a direct relationship between the
input and the satisfaction of the performance obligation.
Payment terms under these contracts are typically 30 days.
(c) Subscription Income
The Group has membership subscription contracts with customers. Subscription income for membership services provided over an annual
contractual period is recognised in the income statement on a straight-line basis over the period of the contract.
(d) Product and Associated Revenue
The Group supplies audio chips and modules to customers based on purchase orders received from customers. Revenue is recognised upon
the transfer of control of promised products or services and for the majority of revenue, transfer of control occurs once the product has been
collected, as the terms are ex-works. For smart radio products, ongoing IT infrastructure services are provided over a period of time in order
for the consumer to use the full functionality of the end product. When such services have been identified as both capable of being distinct
and separately identifiable from the related tangible product, the associated revenue allocated to such services is recognized over time.
Where there are separate performance obligations in a contract (being the product and the ongoing IT infrastructure services), it has been
determined that directly observable prices do not exist for these performance obligations, therefore the transaction price is calculated as the
expected cost plus a margin.
Revenue is recorded net of sales tax and relevant sales incentives when the performance conditions are met. Sales incentives are rebates
offered to customers and paid based on total sales made to respective customers each year. The rebates are estimated on a regular basis by
using the most likely amount method. The rebates will be accrued only to the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. To the extent unpaid, the rebate liability is presented under accruals.
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these
amounts as trade and other payables in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it
receives the consideration, the Group recognises as trade and other receivables in its statement of financial position.
2.19 Foreign currency
(a) Functional and presentation currency – items included in the financial statements of each of Science Group’s 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 Group’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.
2. Summary of significant accounting policies continued
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FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
2.19 Foreign currency continued
(c) Group companies – the results and financial position of all Science Group 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.
(iv) on disposal of a foreign subsidiary the accumulated translation differences recognised in equity are reclassified to profit or loss and
recognised as part of the gain or loss on disposal.
2.20 Employee benefits
(a) Post employment benefit plans
The Group provides post-employment benefits through various defined contribution plans.
Defined contribution plans
The Group pays fixed contributions into independent entities in relation to several retirement plans and insurances for individual employees.
The Group has no legal or constructive obligations to pay contributions in addition to its fixed contributions, which are recognised as an
expense in the period that related employee services are received.
(b) Share-based compensation
Science Group operates an equity-settled, share-based compensation plan, awarding options to certain employees. More details on the
scheme are reported in Note 22. 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 incorporate any market performance conditions. Non-market vesting conditions are
included in assumptions about the number of options that are expected to become exercisable.
The Group has the following plans.
•
The Performance Share Plan (‘PSP’): Targets are set on EPS over three years, with options valued using the Binomial Option Pricing model.
•
The Enhanced Executive Incentive Addendum: Options for directors and senior managers with vesting conditions based on the share
price, valued using the Monte Carlo model.
At each balance sheet date, the Group 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 employer’s NIC liability on vested share options, or the proportion that have vested, is recognised as a provision. As the employee is
contractually responsible for the Employer’s NIC on any share options exercised (and is required to remit this sum to the Group prior to the
share options being exercised) a corresponding current asset is recognised.
The share-based compensation charge in the Group accounts is based only on those option holders employed directly by the Group.
(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. Science Group recognises termination benefits at the earlier of when the Group can no
longer withdraw the offer of the termination benefit and when the Group recognises any related restructuring costs.
(d) Profit-sharing and bonus plans
Science Group recognises a liability and an expense for bonuses and/or profit-sharing, based on the incentive plans approved by the
Remuneration Committee. Science Group recognises a liability where contractually obliged or where there is a past practice that has created
a constructive obligation.
(e) Sales commission
Science Group 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 typically paid
quarterly. As the amortisation period of such costs, if capitalised, would be less than one year, the Group makes use of the practical
expedient in IFRS 15 and expenses them as incurred.
2.21 Taxation
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.
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.
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 Science Group, and it is probable that the temporary difference will not reverse in the foreseeable
future.
The Group performed a reasonable estimate of all amounts involved to determine the R&D tax credits to be recognised in the period to
which it relates.
2.22 Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.
(a) As a lessee
The Group has leases, principally for office space, in the UK, Europe, North America and China. Office rental contracts are typically
negotiated for terms ranging from 2 and 10 years with some including extension options. The Group does not enter into sale and leaseback
arrangements. None of the leases included residual value guarantees or purchase options. All the leases are negotiated on an individual
basis and contain different terms and conditions such as break clauses, rent reviews and extensions. At commencement or on modification
of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of
its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account
for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured
at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset
or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease
term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-
use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life
of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, being the rate of interest which a lessee would have
to pay to borrow the funds necessary to obtain an asset, obtained from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased.
The Group determines its incremental borrowing rate as a lessee by obtaining interest rates from various external financing sources and
makes certain adjustments to reflect the terms of the lease and type of the asset leased.
As of the balance sheet date, there are no leases that have been committed to but have not yet commenced.
Lease payments included in the measurement of the lease liability comprise the following:
•
fixed payments, including in-substance fixed payments.
•
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date.
•
amounts expected to be payable under a residual value guarantee.
•
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal
period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group
is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under
a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if
there is a revised in-substance fixed lease payment. In general the Group assumes that leases will run to the end of the break period.
2. Summary of significant accounting policies continued
59
58 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
2.22 Leases continued
(a) As a lessee continued
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘property, plant and equipment’ and
associated lease obligations in ‘lease liabilities’ in the Consolidated Balance Sheet.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including
IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease
term. The total expense for short-term leases and leases with low-value assets for the year ended 31 December 2024 was £0.1 million (2023:
£0.1 million).
(b) As a lessor
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each
lease component on the basis of their relative standalone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each
lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership
of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the
Group considers certain indicators such as whether the lease is for a major part of the economic life of the asset.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term.
2.23 Dividends paid
Dividends are recognised as a liability in the period in which the shareholders’ right to receive payment has been established.
2.24 Dividend income
Dividend income is recognised when the right to receive payment is established.
3. Financial risk management
3.1 Financial risk factors
Science Group’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. Science Group’s overall financial risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on Science Group’s financial performance. Science Group uses derivative
financial instruments to hedge certain risk exposures.
(a) Foreign currency sensitivity
Science Group 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 Science
Group may use forward contracts and other instruments. The Group acquired a currency exchange instrument to cap the US Dollar/GBP
rate in relation to the Consultancy Services segment US Dollar revenue through to the end of 2024. The instrument is a US Dollar/GBP cap
set at $1.25/£1 which applies to $1.0 million per month. In the event that the exchange rate moves above $1.25/£1 at set monthly dates
the Consultancy Services segment was guaranteed to receive £0.8 million for $1.0 million. Similar instruments have also been acquired in
relation to 2025 covering $1.0 million per month at a blended rate of $1.275/£1 (see Note 24). 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 primarily by selling monies held in currency into GBP
on a regular basis.
Science Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Foreign
currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows:
2024
US Dollar
£000
Euro
£000
Other
£000
Total
£000
Financial assets
11,032
845
359
12,236
Financial liabilities
(1,450)
(171)
(218)
(1,839)
Exposure
9,582
674
141
10,397
2023
US Dollar
£000
Euro
£000
Other
£000
Total
£000
Financial assets
9,967
806
302
11,075
Financial liabilities
(1,098)
(201)
(660)
(1,959)
Exposure
8,869
605
(358)
9,116
All foreign currency denominated financial assets and liabilities are classified as current.
The following table illustrates the sensitivity of the net movement on Consolidated Income Statement and equity in regard to Science Group’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 US Dollar/GBP exchange rate as at 31 December 2024 (2023: +/-10.0%). A 10.0% change is considered for the Euro/GBP exchange rate
(2023: +/-10.0%). If the GBP had strengthened against the US Dollar and Euro by 10.0% (2023: 10.0%) respectively then this would have had
the following impact:
2024
US Dollar
£000
Euro
£000
Other
£000
Total
£000
Income statement
(352)
(54)
(14)
(420)
Equity
(333)
(126)
77
(382)
2023
US Dollar
£000
Euro
£000
Other
£000
Total
£000
Income statement
(263)
(38)
–
(301)
Equity
(1,355)
(157)
(36)
(1,548)
For a 10.0% weakening of GBP against the relevant currency, there would be a comparable but opposite impact on the Consolidated Income
Statement and equity.
The Company did not hold any material financial assets or liabilities in foreign currencies at the start nor end of the year.
The currency rate movements against the US Dollar and Euro at year end compared to the previous year end were 1.7% (2023: -5.2%)
and -4.9% (2023: -2.3%) respectively. Exposures to foreign exchange rates vary during the year depending on the volume and value of
transactions.
(b) Interest rate risk
Science Group 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, Science Group raises long-term borrowings
at floating rates and swaps them into fixed rates that are lower than those available if Science Group borrowed at fixed rates directly. Under
the interest rate swaps, Science Group 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.
Science Group’s bank borrowings and its interest rate profile are as follows:
Group
2024
£000
2023
£000
Pound Sterling – bank loan
11,800
13,000
Weighted average interest rate
Pound Sterling – fixed rate bank loan
3.5%
3.5%
Pound Sterling – floating rate bank loan
SONIA+2.6%
SONIA+2.6%
For benchmark rates of interest, Science Group refers to SONIA. The bank loan is secured via a fixed charge over certain assets of Science
Group and is repayable as disclosed in Note 23. Terms and conditions of the interest rate swaps are as disclosed in Note 23. The interest
rate swaps mature in accordance with the repayment profile of the loan: £0.8 million in September 2025 and the balance of £11.0 million in
September 2026. Given the interest rate swaps in place there is no exposures to interest rate movements to P&L and an immaterial impact
to equity. If the SONIA rate goes up by 25 basis points, it is estimated that the net impact to equity would be approximately £37,000 (2023:
£64,000).
(c) Credit risk analysis
Science Group 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. Science Group has
policies that limit the amount of credit exposure to any financial institution. Science Group’s exposure to credit risk is limited to the carrying
amount of financial assets recognised at the balance sheet date, as summarised below:
Group
Company
Note
2024
£000
2023
£000
2024
£000
2023
£000
Cash and cash equivalents – Group cash
19
38,556
30,949
18,721
16,548
Cash and cash equivalents – Client registration funds
19
2,895
1,881
–
–
Trade and other receivables (excluding VAT, taxation and
prepayments)
18
22,648
20,668
4,694
9,530
64,099
53,498
23,415
26,078
2. Summary of significant accounting policies continued
61
60 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
3.1 Financial risk factors continued
(c) Credit risk analysis continued
Science Group 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. Science Group’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. Science Group’s management considers
that all in relation to the above financial assets the expected credit losses are considered to be insignificant. An analysis of trade and other
receivables that are considered to be impaired are disclosed in Note 18. None of Science Group’s financial assets are secured by collateral
nor other credit enhancements.
(d) Liquidity risk analysis
Science Group 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.
Science Group maintains cash to meet its liquidity requirements in interest bearing current accounts.
As at 31 December 2024, Science Group’s financial liabilities have contractual undiscounted cashflows and maturities as below:
2024
Current
Non-current
Group
Note
< 6
months
£000
6 to 12
months
£000
1 to 5
years
£000
> 5
years
£000
Bank borrowings
23
600
600
10,600
–
Interest on bank borrowings
198
191
264
–
Lease payments
25
509
512
2,354
1,106
Trade payables
20
4,022
–
–
–
Accruals
20
6,604
–
–
–
11,933
1,303
13,218
1,106
This compares to the maturity of Science Group’s financial liabilities in the previous reporting period as follows:
2023
Current
Non-current
Group
Note
< 6
months
£000
6 to 12
months
£000
1 to 5
years
£000
> 5
years
£000
Bank borrowings
23
600
600
11,800
–
Interest on bank borrowings
220
212
653
–
Lease payments
25
426
418
2,559
1,478
Trade payables
20
4,106
–
–
–
Accruals
20
7,657
–
–
–
13,009
1,230
15,012
1,478
As at 31 December 2024, the Company’s financial liabilities have contractual undiscounted cashflows and maturities as below:
2024
Current
Non-current
Company
Note
< 6
months
£000
6 to 12
months
£000
1 to 5
years
£000
> 5
years
£000
Trade payables and other payables
20
14,098
–
–
–
Lease payments
85
85
211
–
Accruals
20
1,313
–
–
–
15,496
85
211
–
This compares to the maturity of the Company’s financial liabilities in the previous reporting period as follows:
2023
Current
Non-current
Company
Note
< 6
months
£000
6 to 12
months
£000
1 to 5
years
£000
> 5
years
£000
Trade payables and other payables
20
21,391
–
–
–
Accruals
20
874
–
–
–
22,265
–
–
–
(e) Summary of financial assets and liabilities by category
The carrying amounts of Science Group’s financial assets and liabilities as recognised at the balance sheet date of the reporting periods
under review may also be categorised as follows:
Group
Company
Note
2024
£000
2023
£000
2024
£000
2023
£000
Financial assets at amortised cost:
Trade receivables
18
16,642
13,799
–
–
Other receivables
18
6,005
6,869
4,694
9,530
Cash and cash equivalents – Group cash
19
38,556
30,949
18,721
16,548
Cash and cash equivalents – Client registration funds
19
2,895
1,881
–
–
64,098
53,498
23,415
26,078
Financial liabilities at amortised cost:
Non-current borrowings
23
10,572
11,756
–
–
Current borrowings
23
1,200
1,200
–
–
Lease payments
25
4,481
4,881
381
–
Trade payables
20
4,022
4,106
–
210
Other payables
20
–
–
14,098
21,181
Accruals
20
6,604
7,657
1,313
874
26,879
29,600
15,792
22,265
Derivatives used for hedging held at fair value:
Non-current financial instrument assets
24
627
886
–
–
Current financial instrument assets
24
144
301
–
–
771
1,187
–
–
The fair value of Science Group’s financial assets and liabilities is not materially different from the carrying value.
3. Financial risk management continued
63
62 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
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)
•
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 is based on the lowest level of significant input to the fair value
measurement.
The Group has measured the interest rate swaps and the currency exchange instruments in non-current financial instruments and
current financial instruments in the Consolidated Balance Sheet respectively at fair value under level 2. The Group’s finance team performs
valuations of financial items for financial reporting purposes, including level 2 fair values, in consultation with third party valuation specialists
for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of
maximising the use of market-based information. These contracts have been fair valued using observable interest rates and exchange rates
corresponding to maturity of the contract. The effects of non-observable inputs are not significant for both instruments.
The Group has the following financial assets and liabilities. IFRS 13 requires disclosure of the fair value measurements for each instrument
using the fair value hierarchy levels as below:
Group
Level 1
£000
Level 2
£000
2024
£000
Level 1
£000
Level 2
£000
2023
£000
Financial assets at amortised cost:
Trade receivables
16,642
–
16,642
13,799
–
13,799
Other receivables
6,005
–
6,006
6,869
–
6,869
Cash and cash equivalents – Group cash
38,556
–
38,556
30,949
–
30,949
Cash and cash equivalents – Client registra-tion funds
2,895
–
2,895
1,881
–
1,881
64,098
–
64,099
53,498
–
53,498
Financial liabilities at amortised cost:
Non-current borrowings
–
10,572
10,572
–
11,756
11,756
Current borrowings
–
1,200
1,200
–
1,200
1,200
Lease payments
–
4,481
4,481
–
4,881
4,881
Trade payables
4,022
–
4,022
4,106
–
4,106
Accruals
6,604
–
6,604
7,657
–
7,657
10,626
16,253
26,879
11,763
17,837
29,600
Derivatives used for hedging held at fair value:
Non-current derivative financial asset
–
627
627
–
886
886
Current derivative financial asset
–
144
144
–
301
301
–
771
771
–
1,187
1,187
The fair values of financial assets and liabilities at amortised cost are determined to be in line with book value, as this is considered to be a
reasonable approximation.
Company
Level 1
£000
Level 2
£000
2024
£000
Level 1
£000
Level 2
£000
2023
£000
Financial assets at amortised cost:
Other receivables
4,694
–
4,694
9,530
–
9,530
Cash and cash equivalents – Group cash
18,721
–
18,721
16,548
–
16,548
23,415
–
23,415
26,078
–
26,078
Financial liabilities at amortised cost:
Lease payments
381
–
381
–
–
–
Trade payables
–
–
–
210
–
210
Other payables
14,098
–
14,098
21,181
–
21,181
Accruals
1,313
–
1,313
874
–
874
15,792
–
15,792
22,265
–
22,265
The fair values of financial assets and liabilities at amortised cost are determined to be in line with book value, as this is considered to be a
reasonable approximation.
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. The Group primarily views its capital as being its shareholders’ funds, net funds (being Group cash less
borrowings) and the freehold properties at Harston Mill and Great Burgh.
Group
Note
2024
£000
2023
£000
Shareholders’ funds
83,626
77,987
Net funds
1
26,784
17,993
Freehold properties at Harston Mill and Great Burgh
15
20,836
21,014
Shareholders’ funds
Company
Summary of subsidiary dividends paid to Science Group plc
2024
£000
2023
£000
Leatherhead Research Limited
2,000
2,500
OTM Consulting Ltd
–
140
Sagentia Limited
8,000
8,000
Technology Sciences Group Consulting Limited
3,000
3,000
Technology Sciences Group Inc.
2,986
–
Total dividends paid
15,986
13,640
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 8.0 pence per share at the forthcoming AGM
(2023: 8.0 pence per share). The Board anticipates recommending a single dividend being paid each year.
Net funds
The net funds of the Group have increased by £8.8 million in 2024 (2023: decreased by £11.5 million) as set out in the Net Funds Movement
in Note 1(c). Details of the Group’s borrowings are set out in Note 23 which summarises the terms of the loan and interest rate swap
arrangement.
Freehold property
Details of freehold property and related rental income are set out in Note 15.
3. Financial risk management continued
65
64 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
4. Segment information
The Consultancy Services Segment comprises the Research & Development, Regulatory & Compliance, and Defence & Aerospace Practices.
The Systems – Submarine Atmosphere Management Segment comprises the Critical Maritime Systems & Support (‘CMS2’) Business, which
designs, develops and manufactures submarine atmosphere systems for the Defence sector. The Systems – Audio Chips and Modules
Segment comprises the Frontier Business, which is a provider of DAB/DAB+ radio semi-conductors/modules.
The Group’s segmental reporting shows the performance of the operating businesses separately from the value generated by the Group’s
significant freehold property assets and the corporate costs. The Consultancy Services Segment consists of three Practices: (i) Research &
Development, (ii) Regulatory & Compliance and (iii) Defence & Aerospace. Financial information is provided to the Chief Operating Decision
Makers (‘CODMs’) in line with this structure: the Consultancy Services Segment; the two Systems Businesses (Submarine Atmosphere
Management and Audio Chips and Modules); the Freehold Properties and Corporate costs.
The Consultancy Services Practices are aggregated into one Consultancy Services Segment because the Practices provide similar consultancy
services and share economic characteristics, including the timing of revenue recognition, the nature of performance obligations, and the
nature of costs incurred in the provision of said performance obligations. The CODM reviews this Segment as a whole. This aggregation does
not impact the user’s ability to understand the entity’s performance, its prospects for future cash flows or the user’s decisions about the
entity as a whole as it is a fair representation of the performance of each service line.
Consultancy Services revenue includes all consultancy fees and other revenue includes recharged materials and expenses relating directly
to Consultancy Services activities. Systems - Submarine Atmosphere Management revenue includes the development, manufacture and
support of specialist systems for submarine atmosphere management, used in the UK and international naval defence markets. Systems -
Audio Chips and Modules revenue includes sales of chips and modules which are incorporated into digital radios. The Freehold Properties
Segment includes the results for the two freehold properties owned by the Group. Income is derived from third party tenants from the
Harston Mill site and from internal businesses which have been charged fees at an arm’s length market rental rate for their utilised property
space and associated costs. Corporate costs include PLC/Group costs.
The segmental analysis is reviewed to operating profit. Other resources are shared across the Group.
Consultancy Services
2024
£000
2023
£000
Consultancy Services revenue
70,978
79,729
Other
1,231
1,553
Revenue
72,209
81,282
Direct operating expenses
(38,768)
(43,142)
Sales and marketing expenses
(7,209)
(7,322)
Administrative expenses
(11,342)
(13,938)
Adjusted operating profit
17,947
20,355
Amortisation of acquisition related intangible assets
(1,487)
(1,918)
Share-based payment charge
(1,570)
(1,557)
Operating profit
14,890
16,880
Systems – Submarine Atmosphere Management
2024
£000
2023
£000
Systems revenue - Submarine Atmosphere Management
25,857
21,265
Revenue
25,857
21,265
Direct operating expenses
(17,066)
(14,686)
Sales and marketing expenses
(338)
(327)
Administrative expenses
(3,769)
(3,462)
Adjusted operating profit
5,737
3,619
Amortisation of acquisition related intangible assets
(820)
(752)
Share-based payment charge
(233)
(77)
Operating profit
4,684
2,790
Systems – Audio Chips and Modules
2024
£000
2023
£000
Systems revenue – Audio Chips and Modules
11,970
9,975
Revenue
11,970
9,975
Direct operating expenses
(9,558)
(8,496)
Sales and marketing expenses
(1,293)
(1,463)
Administrative expenses
(3,356)
(3,946)
Adjusted operating profit/(loss)
85
(1,427)
Amortisation of acquisition related intangible assets
(2,081)
(2,274)
Share-based payment charge
(241)
(229)
Operating loss
(2,237)
(3,930)
Freehold Properties
2024
£000
2023
£000
Intra-Group property income
3,313
3,398
Third party property income
633
819
Revenue
3,946
4,217
Direct operating expenses
(2,330)
(2,810)
Administrative expenses
(966)
(854)
Adjusted operating profit
713
597
Share-based payment charge
(63)
(44)
Operating profit
650
553
Corporate
2024
£000
2023
£000
Direct operating expenses
(1,082)
(1,354)
Sales and marketing expenses
(78)
(94)
Administrative expenses
(1,946)
(6,531)
Share of loss of equity-accounted investment
–
(169)
Adjusted operating loss
(2,941)
(2,609)
Acquisition integration costs
–
(518)
Loss on remeasurement of equity-accounted investment
–
(4,762)
Share-based payment charge
(165)
(90)
Share of loss of equity-accounted investment
–
(169)
Operating loss
(3,106)
(8,148)
67
66 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
Group
2024
£000
2023
£000
Consultancy Services revenue
70,978
79,729
Systems revenue – Submarine Atmosphere Management
25,857
21,265
Systems revenue – Audio Chips and Modules
11,970
9,975
Third party property income
633
819
Other
1,231
1,553
Revenue
110,669
113,341
Direct operating expenses
(65,491)
(67,090)
Sales and marketing expenses
(8,918)
(9,206)
Administrative expenses
(21,379)
(28,731)
Share of loss of equity-accounted investment
–
(169)
Adjusted operating profit
21,541
20,535
Acquisition integration costs
–
(518)
Amortisation of acquisition related intangible assets
(4,388)
(4,944)
Loss on remeasurement of equity–accounted investment
–
(4,762)
Share-based payment charge
(2,272)
(1,997)
Share of loss of equity-accounted investment
–
(169)
Operating profit
14,881
8,145
Net finance costs
(142)
(526)
Profit before income tax
14,739
7,619
Income tax charge
(2,719)
(2,095)
Profit for the period
12,020
5,524
In the Freehold Properties Segment, income includes £3.3 million (2023: £3.4 million) generated from intra-group recharges. The
corresponding costs are included within the respective Group businesses and are eliminated on consolidation.
Other income relates to rechargeable materials within the Consultancy Services Segment.
During 2024, no single customer accounted for more than 10% of the Group’s revenue (2023: one).
Geographical analysis
Non-current assets (excluding derivative financial instruments and deferred tax assets) by geographical area are as follows:
2024
£000
2023
£000
United Kingdom
64,287
69,181
Other European Countries
3
4
North America
692
982
Asia
79
33
65,061
70,200
Non-current assets are allocated based on their physical location. The assets of the Group are predominantly based in the UK.
Operating profit for the Consultancy Services Segment included a depreciation charge of £0.5 million (2023: £0.2 million), the Systems -
Submarine Atmosphere Management Segment included a depreciation charge of £0.3 million (2023: £0.1 million), the Systems - Audio Chips
and Modules Segment included a depreciation charge of £0.1 million (2023: £0.1 million), the Freehold Properties included a depreciation
charge of £0.3 million (2023: £0.4 million) and Corporate included a depreciation charge of £0.1 million (2023: £nil).
4. Segment information continued
5. Revenue
5.1 Revenue streams
The Group’s operations and main revenue streams are those described in Note 4. The Group’s revenue is derived from contracts with customers.
5.2 Disaggregation of revenue
In the following table, revenue is disaggregated by geographical market and by the currency in which the contract is denominated. For the
purpose of the analysis of revenue, geographical markets are defined as the country or area in which the client is based.
Primary geographic markets
2024
£000
2023
£000
United Kingdom
51,067
52,522
Other European Countries
15,023
14,202
North America
24,368
29,056
Asia
19,489
16,641
Other
722
920
110,669
113,341
Currency
2024
£000
2023
£000
US Dollar
32,762
34,642
Euro
1,788
3,876
Sterling
76,119
74,823
110,669
113,341
Included in the United Kingdom and Sterling disclosure above is rental income of £633,000 (2023: £819,000).
Timeframe
2024
£000
2023
£000
Revenue recognised at a point in time
29,788
16,306
Revenue recognised over a period of time
80,881
97,035
110,669
113,341
5.3 Contract balances
The following table provides information about receivables, amount recoverable on contracts and contract liabilities from contracts with
customers.
Note
2024
£000
Restated*
2023
£000
Receivables that are included in ‘Trade and other receivables’
18
16,642
13,799
Unbilled invoices on contracts that are included in ‘Trade and other receivables’
18
1,679
2,408
Amount recoverable on contracts that are included in ‘Trade and other receivables’
18
4,283
4,300
Contract liabilities that are included in ‘Trade and other payables’
20
(17,863)
(15,669)
Client registration funds on account that are included in ‘Trade and other payables’
19, 20
(2,895)
(1,881)
* An amount of £2,408,000, previously disclosed under ‘Amount recoverable on contracts’ within ‘Trade and other receivables’ is now presented under ‘Unbilled invoices on contracts’ (Note
18) reflecting a correction in the presentation to align with the nature of the balances, which are uninvoiced but where an unconditional right to receive consideration exists. The 2023
‘Amount recoverable on contracts’ included in ‘Trade and other receivables’ has been restated from £6,708,000 to £4,300,000.
* An amount of £1,881,000, previously disclosed under ‘Contract liabilities’ within ‘Trade and other payables’ is now presented under ‘Client registration funds on account’ (Note 20). The
2023 ‘Contract liabilities’ included in ‘Trade and other payables’ has een restated from £17,550,000 to £15,669,000.
The amounts recoverable on contracts primarily relate to the Group’s rights to consideration for work performed but not billed at the
reporting date. The amounts recoverable on contracts are transferred to receivables when the rights to receive cash become unconditional,
i.e. when the Group has fulfilled all the performance obligations and an invoice is issued to the customer.
The contract liabilities primarily relate to the advance consideration received from customers (Note 20). The remainder represents revenue
to be recognised over time as the work is performed. The balance of £2.9 million (2023: £1.9 million) that relates to pass through fees which
represent advance payments for registration fees to be paid to regulatory bodies is excluded as these balances are not recognised as
revenue (Note 20).
69
68 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
5.3 Contract balances continued
Significant changes in the amount recoverable on contracts and the contract liabilities balances during the period are as follows:
Year ended 31 December 2024
Amount
recoverable
on contracts
£000
Contract
Liabilities
£000
Revenue recognised that was included in the contract liability at the beginning of the period
–
15,669
Increase due to invoices raised to clients, excluding amounts recognised as revenue in the period
–
(17,863)
Transfers from amount recoverable on contracts recognised at the beginning of the period to receivables
(4,300)
–
Increases as a result of changes in the measure of progress
4,283
–
Year ended 31 December 2023
Restated*
Amount
recoverable
on contracts
£000
Contract
Liabilities
£000
Revenue recognised that was included in the contract liability at the beginning of the period
–
16,812
Increase due to invoices raised to clients, excluding amounts recognised as revenue in the period
–
(15,669)
Transfers from amount recoverable on contracts recognised at the beginning of the period to receivables
(1,152)
–
Increases as a result of changes in the measure of progress
4,300
–
* An amount of £2,408,000, previously disclosed under ‘Amount recoverable on contracts’ within ‘Trade and other receivables’ is now presented under ‘Unbilled invoices on contracts’ (Note
18). The 2023 ‘Amount recoverable on contracts’ included in ‘Trade and other receivables’ has been restated from £6,708,000 to £4,300,000.
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance
obligations that have original expected durations of one year or less.
6. Operating expenses
Operating profit is stated after charging/(crediting):
Year ended 31 December
Note
2024
£000
2023
£000
Cost of inventories
16,457
12,128
Share of loss of equity-accounted investment
16
–
169
Depreciation of property, plant and equipment
15
528
694
Depreciation of right-of-use assets
15, 25
865
1,053
Foreign currency (gains)/losses
(202)
66
Amortisation of intangible assets
14
4,388
4,944
Research and development*
8,889
10,234
*R&D costs are represented by employee and material costs incurred in relation to R&D projects.
Auditor’s remuneration
2024
£000
2023
£000
Auditor’s remuneration to Grant Thornton UK LLP:
Fees payable to the Company’s auditors for the audit of the financial statements
173
125
Fees payable to the Company’s auditors for the audit of the Company’s subsidiaries pursuant to legislation
442
377
Remuneration to Grant Thornton UK LLP for non-audit services:
Audit related assurance services
18
16
Tax compliance services
5
12
Other taxation advisory services
–
8
Remuneration to Grant Thornton International for audit and non-audit services:
Fees payable for the audit of the financial statements
26
21
Accountancy and taxation services for a foreign subsidiary
4
28
5. Revenue continued
71
70 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
7. Finance income and finance costs
Net finance costs include all interest-related income and expenses through profit or loss. The following have been included in the
Consolidated Income Statement for the years presented:
Group
Year ended 31 December
2024
£000
2023
£000
Finance income
Bank interest receivable and similar income
828
616
Amortisation of credit facility arrangement fee
–
63
828
679
Finance costs
Interest on bank borrowings
(447)
(482)
Fees on settlement of revolving credit facility
(268)
(268)
Amortisation of loan arrangement fees
(16)
(17)
Amortisation of revolving credit facility arrangement fee
(81)
(81)
Bank interest payables and similar costs
(7)
(23)
Interest on lease liabilities
(151)
(334)
(970)
(1,205)
Net finance costs
(142)
(526)
8. Employee benefit expenses
Employment costs are shown below:
Group
Year ended 31 December
Note
2024
£000
2023
£000
Wages and salaries (including bonuses)
39,056
43,548
Social security costs
5,296
5,872
Redundancy costs
424
673
Pension costs
2,626
2,700
47,402
52,793
Share-based payments
22
2,272
1,997
Total employee benefit expenses
49,674
54,790
Wages and salaries costs (including bonuses) for the Company were £672,000 (2023: £601,000), with social security costs for the year of
£90,000 (2023: £82,000) and pension costs of £nil (2023: £nil). None of the employees of the Company have share options, therefore there is
no share-based payment charge for the Company (2023: £nil).
The average monthly number of total persons employed (including Executive and Non-Executive Directors and fixed term contractors) by
Science Group was as follows:
Group
Year ended 31 December
2024
Number
2023
Number
Consultants and engineers
449
532
Marketing, support, administration, and other technically qualified staff
141
164
Total average number
590
696
The average monthly number of persons employed by the Company was 3 (2023: 3).
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
9. Directors’ remuneration, interests and transactions
Directors’ emoluments and benefits include:
Year ended 31 December 2024
Name of Director
Salary/
fee
£000
Bonus
£000
Pension
contribution
£000
Other
payment
£000
Total
£000
Ratcliffe
450
–
–
–
450
Edwards
251
102
17
1
371
Brett
165
33
11
–
209
Bertram
49
–
–
–
49
Clement Davies
49
–
–
–
49
Aggregate emoluments
964
135
28
1
1,128
Year ended 31 December 2023
Name of Director
Salary/
fee
£000
Bonus
£000
Pension
contribution
£000
Other
payment
£000
Total
£000
Ratcliffe
495
–
–
–
495
Edwards
251
113
17
1
382
Brett
154
35
11
–
200
Bertram
45
–
–
–
45
Clement Davies
43
–
–
–
43
Lacey-Solymar
17
–
–
–
17
Aggregate emoluments
1,005
148
28
1
1,182
Directors’ emoluments and benefits are stated for the Directors of Science Group plc only.
A share-based payment charge of £419,000 was recognised in the Consolidated Income Statement relating to share options held by
Directors who are employed by Sagentia Limited (2023: £390,000).
The amounts shown were recognised as an expense during the year and relate to the Directors of the Company. Bonuses, pension and
medical benefits are not paid to Non-Executive Directors. Mr Ratcliffe does not participate in the Group bonus scheme or receive pension or
medical benefits.
Total social security costs related to Directors during the year was £154,000 (2023: £160,000).
Other payments relate to the provision of private medical insurance.
Directors’ interests in the shares of Science Group as at 31 December 2024 and 31 December 2023 are as follows.
Science Group plc
Ordinary shares of £0.01
Options
Shares
Year ended 31 December
2024
2023
2024
2023
2024
2023
Average exercise
price (pence)
Number
Number
Number
Number
Ratcliffe
–
–
–
–
9,462,080
9,412,080
Edwards
1.0
1.0
620,000
385,000
93,333
150,000
Brett
1.0
1.0
235,000
125,000
2,000
–
Bertram
–
–
–
–
5,000
5,000
855,000
510,000
9,562,413
9,567,080
There have been no changes subsequent to 31 December 2024.
See Note 22 for further details on option plans.
10. Income tax
The tax charge comprises:
Year ended 31 December
Note
2024
£000
2023
£000
Current taxation
(3,435)
(3,056)
Current taxation – adjustment in respect of prior years
854
84
Deferred taxation
11
(72)
317
Deferred taxation – adjustment in respect of prior years
(772)
43
R&D tax credit
706
517
(2,719)
(2,095)
The adjustments in prior years are due to estimation differences related to the tax charge. In 2024, the Group opted to use tax losses sooner
than anticipated, resulting in a higher than normal current tax adjustment offset by a matching deferred tax adjustment.
The corporation tax on Science Group’s profit before tax differs from the theoretical amount that would arise using the blended corporation
tax rate across the various jurisdictions applicable to profits/(losses) of the consolidated companies of 23.3% (2023: 24.1%) as follows:
2024
£000
2023
£000
Profit before tax
14,739
7,619
Tax calculated at domestic tax rates applicable to profits/(losses) in the respective countries
(3,434)
(1,836)
Expenses not deductible for tax purposes
(280)
(1,589)
Adjustment in respect of prior years – current tax
854
84
Adjustment in respect of prior years – deferred tax
(772)
43
Share scheme movements
77
554
Utilisation of losses previously not recognised
11
241
Utilisation of previously unrecognised tax losses
119
(71)
Share of loss of equity-accounted investment
–
(38)
Research & Development (‘R&D’) tax credit
706
517
Tax charge
(2,719)
(2,095)
The Group claims R&D tax credits under the R&D expenditure credit scheme. In the current year, the Group recognised a tax credit of
£0.7 million (2023: £0.5 million). The Group performed a reasonable estimate of all amounts involved to determine the R&D tax credits to
be recognised in the period to which it relates.
73
72 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
11. Deferred tax
The movement in deferred tax assets and liabilities during the year by each type of temporary difference is as follows:
Group
Accelerated
capital
allowances
£000
Tax
losses
£000
Share-based
payment
£000
Acquisition
related
intangible
assets
£000
Other
temporary
differences
£000
Total
£000
At 1 January 2023
28
2,176
1,768
(1,811)
(67)
2,094
Credited/(charged) to the Income Statement
47
(678)
66
985
(103)
317
Deferred taxation relating to acquisitions
4
2,259
–
(5,108)
63
(2,782)
(Charged)/credited to the income statement (adjustment in
respect of prior year)
(8)
–
(51)
–
102
43
(Charged)/credited to Equity
–
–
(486)
–
147
(339)
Effect of movements in exchange rates
(5)
(115)
–
85
–
(35)
At 31 December 2023
66
3,642
1,297
(5,849)
142
(702)
(Charged)/credited to the Income Statement
(18)
(1,114)
288
864
(92)
(72)
(Charged)/credited to the income statement (adjustment in
respect of prior year)
(74)
(798)
–
–
100
(772)
Charged to Equity
–
–
262
–
104
366
Effect of movements in exchange rates
4
28
–
(7)
1
26
At 31 December 2024
(22)
1,758
1,847
(4,992)
255
(1,154)
Company
Other
temporary
differences
£000
Total
£000
At 1 January 2023
23
23
Charged to Consolidated Income Statement
–
–
At 31 December 2023
23
23
Charged to Consolidated Income Statement
3
3
At 31 December 2024
26
26
The Company has available tax losses of approximately £2.3 million (2023: £2.3 million) and these losses do not expire.
Deferred tax assets comprise temporary differences attributable to:
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Tax losses
1,758
3,642
–
–
Share-based payment
1,847
1,297
–
–
Accelerated capital allowances
–
66
–
–
Other temporary differences:
Lease liabilities
178
293
–
–
Provision
320
142
26
23
Total deferred tax assets
4,103
5,440
26
23
Set-off deferred tax liabilities pursuant to set-off provisions
(2,052)
(3,369)
–
–
Net deferred tax assets
2,051
2,071
26
23
Deferred tax liabilities comprise temporary differences attributable to:
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Acquisition related intangible assets
4,992
5,849
–
–
Other temporary differences:
Right-of-use assets
243
293
–
–
Provision
22
–
–
–
Total deferred tax liabilities
5,257
6,142
–
–
Set-off deferred tax liabilities pursuant to set-off provisions
(2,052)
(3,369)
–
–
Net deferred tax liabilities
3,205
2,773
–
–
At 31 December 2024, Science Group had £21.4 million (2023: £29.3 million) of tax losses, the largest component of which related to Frontier
(£16.8 million (2023: £19.2 million)). Of the Frontier losses balance, £7.0 million (2023: £9.1 million) is recognised as a deferred tax asset
which is anticipated to be used to offset future taxable profits. The balance of £9.8 million (2023: £10.1 million) has not been recognised as
a deferred tax asset due to the uncertainty in the timing of utilisation of these losses. Aside from these amounts, the Group has other tax
losses of £4.6 million (2023: £4.2 million) unrecognised as a deferred tax asset due to the low probability that these losses will be utilised.
Factors affecting future tax charges
Deferred tax assets and liabilities were calculated at the substantively enacted corporation tax rates in the respective jurisdictions, taking into
account the impact of any known future changes.
75
74 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
12. Earnings per share
The calculation of earnings per share is based on the following result and weighted average number of shares:
2024
2023
Profit
after tax
£000
Weighted
average
number
of shares
Pence
per share
Profit
after tax
£000
Weighted
average
number
of shares
Pence
per share
Basic earnings per ordinary share
12,020
45,377,531
26.5
5,524
45,553,584
12.1
Effect of dilutive potential ordinary shares:
share options
–
915,406
(0.5)
–
638,394
(0.1)
Diluted earnings per ordinary share
12,020
46,292,937
26.0
5,524
46,191,978
12.0
Only the share options granted, as disclosed in Note 22, are dilutive.
The calculation of adjusted earnings per share is as follows:
2024
2023
Adjusted*
profit after
tax
£000
Weighted
average
number
of shares
Pence
per share
Adjusted*
profit after
tax
£000
Weighted
average
number
of shares
Pence
per share
Adjusted basic earnings per ordinary share
16,413
45,377,531
36.2
15,187
45,553,584
33.3
Effect of dilutive potential ordinary shares:
share options
–
915,406
(0.7)
–
638,394
(0.4)
Adjusted diluted earnings per ordinary share
16,413
46,292,937
35.5
15,187
46,191,978
32.9
2024 has been updated to calculate Diluted EPS on the treasury share method as required by IAS 33.
*The calculation of adjusted profit after tax is as follows:
Group
2024
£000
2023
£000
Adjusted operating profit
21,541
20,535
Finance income
828
679
Finance costs
(970)
(1,205)
Adjusted profit before tax
21,399
20,009
Tax charge at the blended corporation tax rate across the various jurisdictions 23.3% (2023: 24.1%)
(4,986)
(4,822)
Adjusted profit after tax
16,413
15,187
The tax charge is calculated using the blended corporation tax rate across the various jurisdictions in which the Group companies are
incorporated.
13. Dividends
The final dividend for 2023 of £3.7 million was paid in July 2024 (2023: £2.3 million paid for 2022 in June 2023).
The Board has proposed a final dividend for 2024 of 8.0 pence per share (2023: 8.0 pence per share). The dividend is subject to approval
by shareholders at the next Annual General Meeting and the expected cost of £3.6 million has not been included as a liability as at
31 December 2024.
14. Intangible assets
Group
Technical
know-how
and intellectual
property rights
£000
Customer
relationships
£000
Goodwill
£000
Total
£000
Cost
At 1 January 2023
13,656
14,343
17,200
45,199
Acquisitions through business combination
3,346
17,084
4,222
24,652
Effect of movement in exchange rates
(679)
(211)
(319)
(1,209)
At 31 December 2023
16,323
31,216
21,103
68,642
Effect of movement in exchange rates
158
54
64
276
At 31 December 2024
16,481
31,270
21,167
68,918
Accumulated amortisation
At 1 January 2023
4,971
12,206
–
17,177
Amortisation charged in year
2,349
2,595
–
4,944
Effect of movement in exchange rates
(296)
(138)
–
(434)
At 31 December 2023
7,024
14,663
–
21,687
Amortisation charged in year
2,180
2,208
–
4,388
Effect of movement in exchange rates
123
50
–
173
At 31 December 2024
9,327
16,921
–
26,248
Accumulated impairment
At 1 January, 31 December 2023 and 31 December 2024
–
7
2,225
2,232
Carrying amount
At 31 December 2023
9,299
16,546
18,878
44,723
At 31 December 2024
7,154
14,342
18,942
40,438
77
76 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Goodwill and acquisition related intangible assets recognised arose from acquisitions during 2013, 2015, 2017, 2019, 2021 and 2023. The
discount rates used for goodwill impairment reviews and the carrying amount of goodwill is allocated as follows:
2024
2023
Group
Pre-tax
discount rate
£000
Pre-tax
discount rate
£000
R&D Consultancy
17.2%
3,383
17.8%
3,383
Leatherhead Research
17.2%
650
18.1%
650
TSG Americas
17.5%
2,778
17.5%
2,732
TSG Europe
17.2%
4,546
17.9%
4,546
Frontier Smart Technologies Group
20.0%
3,363
20.2%
3,345
CMS2
15.9%
1,576
16.1%
1,576
TPG Services
17.2%
2,646
17.8%
2,646
18,942
18,878
Impairment review of goodwill
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The
recoverable amounts of the Cash Generating Units (‘CGUs’) are determined from value in use. (CGUs are a description of the smallest
identifiable group of assets that generate cash inflows (such as a whether it is a product line, a business operation or a reportable segment
as defined in IFRS8)). The key assumptions for the value in use calculations are those regarding the discount rates, profit margins, and rates
of growth or decline in revenue.
The Group prepares the cash flow forecasts derived from the most recent annual financial plan approved by the Board and extrapolates
cash flows for the following four years based on forecast rates of growth or decline in revenue by the CGU. Beyond 5 years cash flows were
extrapolated using a terminal growth rate of 2.5% based on historic average inflation rates.
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 pre-tax cash flows and are included in the table above.
The revenue growth rates vary by CGU and are included in the relevant CGU section below:
R&D Consultancy CGU
Based on an average revenue growth rate over the next 5 years of 5.1%, the net present value of future cash flows exceeds the carrying value
of the CGU, as such no impairment has been recorded.
A sensitivity analysis using reasonably possible changes in key assumptions has been performed. None of these changes result in the value
of goodwill allocated to R&D Consultancy being in excess of its recoverable amount and therefore no sensitivity analysis is presented.
Leatherhead Research CGU
Based on an average revenue growth rate over the next 5 years of 2.5%, the net present value of future cash flows exceeds the carrying value
of the CGU, as such no impairment has been recorded.
A sensitivity analysis using reasonably possible changes in key assumptions has been performed. None of these changes result in the value
of goodwill allocated to Leatherhead Research being in excess of its recoverable amount and therefore no sensitivity analysis is presented.
When assessing the recoverability of the Epsom freehold property, this has been reviewed as part of the Leatherhead CGU. The Leatherhead
Food Research business uses the Epsom property for office and kitchen space. There were no recoverability issues raised as part of this review.
TSG America CGU
Based on an average revenue growth rate over the next 5 years of 4.1%, the net present value of future cash flows exceeds the carrying value
of the CGU, as such no impairment has been recorded.
A sensitivity analysis using reasonably possible changes in key assumptions has been performed. None of these changes result in the value
of goodwill allocated to TSG America being in excess of its recoverable amount and therefore no sensitivity analysis is presented.
TSG Europe CGU
Based on an average revenue growth rate over the next 5 years of 4.3%, the net present value of future cash flows exceeds the carrying value
on the CGU, as such no impairment has been recorded.
A sensitivity analysis using reasonably possible changes in key assumptions has been performed. None of these changes result in the value
of goodwill allocated to TSG Europe being in excess of its recoverable amount and therefore no sensitivity analysis is presented.
Frontier Smart Technologies Group CGU
Based on an average revenue growth rate over the next 5 years of 13.8% , the net present value of future cash flows exceeds the carrying
value of the CGU, and as such no impairment has been recorded.
A sensitivity analysis using reasonably possible changes in key assumptions has been performed. None of these changes result in the value
of goodwill allocated Frontier Smart Technologies being in excess of its recoverable amount, as such no impairment has been recorded.
CMS2 CGU
Based on an average revenue growth rate over the next 5 years of 2.9%, the net present value of future cash flows exceeds the carrying value
of the CGU, as such no impairment has been recorded.
A sensitivity analysis using reasonably possible changes in key assumptions has been performed. None of these changes result in the value
of goodwill allocated to CMS2 being in excess of its recoverable amount and therefore no sensitivity analysis is presented.
TPG Services CGU
Based on an average revenue growth rate over the next 5 years of 2.8%, and gross margin improvement of 6.3% from that achieved in
2024, the net present value of future cash flows exceeds the carrying value of the CGU by £5.7 million and as such no impairment has been
recorded.
There has been management action in TPG Services to reduce some legacy, low margin defence revenue contracts. This has led to an
overall forecast decrease in revenue within the CGU, with the intention of improving future margin. The forecast expects margin to improve,
however should the transition be slower or less effective than anticipated, revenue and margin may not be at the levels forecast (which may
in turn lead to a potential impairment).
Sensitivity analysis using reasonably possible changes in key assumptions has been performed. With all other base forecast assumptions
remaining constant, a sensitivity was modelled where no gross margin improvement was achieved over the forecast period. In this case,
the business would need to achieve a compound annual revenue growth rate of 10.3% (from a conservative 2025 forecast) to avoid a
potential impairment position. Alternatively, a sensitivity was modelled where revenue and the other forecast base assumptions remained
constant, showing that a 6% increase in gross margin (on 2024) would be needed to avoid a potential impairment position. In both modelled
scenarios, there would be further actions management could take to maintain and improve margin.
14. Intangible assets continued
79
78 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
15. Property, plant and equipment
Group
Freehold land
and buildings
£000
Right–of–use
Assets
£000
Furniture and
fittings
£000
Equipment
£000
Total
£000
Cost
At 1 January 2023
25,194
4,068
2,427
2,286
33,975
Addition due to business combination
–
2,447
135
122
2,704
Additions
–
328
14
66
408
Lease amendment
–
449
–
–
449
Disposals
–
(1,200)
(172)
(150)
(1,522)
Exchange differences on cost
–
(135)
(5)
(23)
(163)
At 1 January 2024
25,194
5,957
2,399
2,301
35,851
Additions
–
204
–
–
204
Lease amendment
–
408
–
–
408
Disposals
–
(821)
–
(57)
(878)
Exchange differences on cost
–
39
1
6
46
At 31 December 2024
25,194
5,787
2,400
2,250
35,631
Accumulated depreciation
At 1 January 2023
4,002
2,245
1,614
1,868
9,729
Depreciation charge
178
1,053
209
307
1,747
Disposals
–
(1,200)
(64)
(128)
(1,392)
Exchange differences on depreciation
–
(70)
(4)
(15)
(89)
At 1 January 2024
4,180
2,028
1,755
2,032
9,995
Depreciation charge
178
865
188
162
1,393
Disposals
–
(736)
–
(57)
(793)
Exchange differences on depreciation
–
25
3
6
34
At 31 December 2024
4,358
2,182
1,946
2,143
10,629
Carrying amount
At 31 December 2023
21,014
3,929
644
269
25,856
At 31 December 2024
20,836
3,605
454
107
25,002
Freehold land and buildings include two properties in the UK.
The Epsom property is held at cost less accumulated depreciation. Included within land and buildings for the Group is freehold land to the
value of £500,000 (2023: £500,000) which has not been depreciated. During the year ended 31 December 2016, the property was brought
into use from which point depreciation commenced. This property was acquired solely for the use of Science Group. This property was last
formally valued by BNP Paribas Real Estate in December 2023 to a range of between £3.9 million (subject to the assumption of full vacant
possession) and £7.6 million (under a sale and leaseback scenario).
The Harston property is held at cost less accumulated depreciation. Included within land and buildings for the Group is freehold land to
the value of £1,360,000 (2023: £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. The Harston property was last formally valued during December 2023 by BNP Paribas
Real Estate. Under the assumptions used, including tenant covenant strength and market rents, the indicative valuation range for the
property was between £13.0 million (subject to the assumption of full vacant possession) and £24.0 million (under a sale and leaseback
scenario).
The Epsom and Harston buildings are depreciated using the straight-line method to allocate their cost less their residual values over their
estimated useful lives of 25 years. The residual values of the properties are based on estimates of the amounts the Group would receive
currently for the properties if they were already of an age and in the condition expected at the end of their useful lives. The residual values
are reviewed annually to ensure that they do not exceed the estimated market values of the properties.
The Harston property generated third party rental and associated income of £633,000 (2023: £819,000). Of this income, £363,000 (2023:
£481,000) was rental income and £270,000 (2023: £338,000) was associated income. Associated income includes, but is not limited to,
utilities, cleaning, and general maintenance.
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
2024 was 15,100 sq. ft. (2023: 21,000 sq. ft.). The leases to tenants are typically for between 24 and 60 months term and normally have a
termination notice period of 3 to 12 months. An average of 47,800 sq. ft. (2023: 47,800 sq. ft.) was used by the Group during the year for
its business activities including office space and laboratory space and 22,800 sq. ft. are common areas. The remaining space of 5.400 sq. ft.
(2023: 5,400 sq. ft.) was vacant during the year.
Given the continuing rental values and occupancy rates the Directors do not believe that the combined carrying value of the Harston and
Epsom properties of £20.8 million (2023: £21.0 million) is significantly different to its fair value.
The Term Loan with Lloyds Bank plc is secured on the Harston and Epsom properties.
Science Group plc, the Company, had fixed assets with a net book value of £306,000 at 31 December 2024 (£29,000 at 31 December 2023).
Residual values have been estimated for the Epsom and Harston properties based on estimates of the amounts the Group would receive
currently for the properties if they were already of an age and in the condition expected at the end of their useful lives. The residual values
are reviewed annually to ensure that they do not exceed the estimated market values of the properties. The property book values have been
considered in comparison to third party valuation reports as well as value in use to the Group. Taking into account these valuation indicators,
the Directors are comfortable the book values are appropriately stated and hold up to a robust level of sensitivity stress testing.
On 19 March 2025 a refinancing of the existing Term Loan which is supported by the Epsom and Harston properties was announced. Further
details can be found in Note 29.
81
80 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
16. Investments
a) Investments in subsidiaries
Science Group plc held investments in the following subsidiaries at 31 December 2024:
Subsidiaries of Science Group plc
Registered
office
Country of
incorporation
Principal
activity
Shares
held
%
Sagentia Limited*
(1)
England
Consultancy
Ordinary
100
Quadro Harston Limited*
(1)
England
Property
Ordinary
100
Quadro Epsom Limited*
(1)
England
Property
Ordinary
100
Sagentia Inc.
(2)
USA
Consultancy
Ordinary
100
Oakland Innovation Ltd*
(1)
England
Consultancy
Ordinary
100
Leatherhead Research Limited*
(1)
England
Consultancy
Ordinary
100
Technology Sciences Group Consulting Limited*
(1)
England
Consultancy
Ordinary
100
Technology Sciences Group (TSG) Canada Inc.
(6)
Canada
Consultancy
Ordinary
100
Technology Sciences Group Iberia SL
(4)
Spain
Consultancy
Ordinary
100
TSGE Deutschland GmbH
(5)
Germany
Consultancy
Ordinary
100
Technology Sciences Group Inc.*
(2)
USA
Consultancy
Ordinary
100
Technology Science Group France SAS*
(3)
France
Consultancy
Ordinary
100
Frontier Smart Technologies Limited*
(1)
England
Production
Ordinary
100
Frontier Silicon (HK) Ltd
(7)
Hong Kong
Production
Ordinary
100
Magic Systech Inc
(8)
Taiwan
Production
Ordinary
100
TP Group Limited*
(1)
England
Holding Company
Ordinary
100
TPG Services Limited
(1)
England
Consultancy
Ordinary
100
Critical Maritime Systems & Support Limited
(1)
England
Production
Ordinary
100
Osprey Consulting Services Limited
(1)
England
Consultancy
Ordinary
100
* Direct subsidiaries of Science Group plc as at 31 December 2024.
OTM Consulting Ltd was dissolved in September 2024.
(1) Harston Mill, Royston Road, Harston, Cambridge, CB22 7GG, England
(2) 1150 18th Street NW Suite 475, Washington, DC 20036
(3) 229 rue Saint-Honoré, 75001, Paris, France
(4) Avenida De Galicia, 22-1, Isquierda, Dr Oviedo, 33005, Spain
(5) Im Fliegerhorst 12 38642 Goslar, Germany
(6) 50 O’Connor Street, Suite 300, Ottawa, Ontario, K1P 6L2, Canada
(7) 31/F Tower Two Times Square, 1 Matheson Street, Causeway Bay, Hong Kong, China
(8) Taipei Concord, 8F, No.367 Fuxing N Rd, Songshan Dist. Taipei 10543 Taiwan
16. Investments continued
b) Investments summary
Subsidiary
investments
£000
Associate
investment
£000
Total
Company
£000
Cost
At 1 January 2023
58,485
10,054
68,539
Capital contribution to subsidiaries*
1,997
–
1,997
Remeasurement of associate investment to reflect fair value on 26 January 2023
–
(4,762)
(4,762)
Acquisition through business combinations**
12,410
–
12,410
Share of loss in associate investment
–
(169)
(169)
Reclassification from associate investment to subsidiary investment**
5,123
(5,123)
–
At 1 January 2024
78,015
–
78,015
Capital contribution to subsidiaries*
2,272
–
2,272
At 31 December 2024
80,287
–
80,287
Impairment
At 1 January 2023, 1 January 2024 and 31 December 2024
2,185
–
2,185
Carrying amount
At 31 December 2023
75,830
–
75,830
At 31 December 2024
78,102
–
78,102
* Capital contributions to subsidiaries are in relation to share-based payment charges for employees of the subsidiaries.
** From August 2021, the Group commenced on-market purchases of shares in TP Group plc, increasing its shareholding to 29.21% as at 31 December 2022. The Group held an associate
shareholding in TP Group plc until 26 January 2023, at which point Science Group plc acquired the remaining shares in TP Group plc and it became a subsidiary undertaking.
For the period from 1 January 2023 to 26 January 2023, when TP Group plc was an associate undertaking, it had revenue from continuing
operations of £2,574,000 and there was a loss in the period of £859,000. Science Group plc’s share of associate loss in this short period was
£169,000.
The investment in Frontier Smart Technologies Limited, is held at a carrying value of £13.7 million (2023: £13.5 million). In 2023, Frontier
Smart Technologies Limited was impacted by the economic downturn in consumer electronics, compounded by overstocking in the
distribution channel related to the post-Covid supply chain imbalances. There was a partial recovery for Frontier Smart Technologies
Limited in 2024 and future forecast cash flows for this investment assume this to continue. When assessing for impairment, management
considered the possibility of a slower than anticipated market recovery. If compound revenue growth is 3.7% less than forecast, an
impairment of the investment would arise. There would however be further actions management could take to maintain and improve
margin. This is in respect of Science Group plc Company only and would have no impact on the Group results.
17. Inventories
Group
2024
£000
2023
£000
Raw materials
220
174
Work in progress
433
743
Finished goods
514
415
1,167
1,332
The costs of inventory included in operating expenses were £16,457,000 (2023: £12,128,000).
The Company held £nil inventories at 31 December 2024 (2023: £nil).
83
82 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
18. Trade and other receivables
Group
Company
2024
£000
Restated*
2023
£000
2024
£000
2023
£000
Current assets:
Trade receivables
16,739
13,899
–
–
Provision for impairment
(97)
(100)
–
–
Trade receivables – net
16,642
13,799
–
–
Amounts recoverable on contracts
4,283
4,300
–
–
Unbilled invoices on contracts
1,679
2,408
–
–
Other receivables
43
161
–
103
Other taxation and social security
1,111
768
–
–
Amounts owed by Group undertakings
–
–
4,694
9,427
VAT
423
222
337
72
Prepayments
3,605
1,657
615
300
27,786
23,315
5,646
9,902
* An amount of £2,408,000, previously disclosed under ‘Amount recoverable on contracts’ is now presented under ‘Unbilled invoices on contracts, reflecting a correction in the
presentation to align with the nature of the balances, which are uninvoiced but where an unconditional right to receive consideration exists. The 2023 ‘Amount recoverable on contracts’
has been restated from £6,708,000 to £4,300,000.
All amounts disclosed above, except for prepayments and amounts owed by Group undertakings, are receivable within 90 days. Amounts
owed by Group undertakings are unsecured and repayable on demand.
The Other taxation and social security asset relates to employer’s NIC liability on share options vested. Of this balance, £653,000 is due after
one year. See Note 21 for further information.
The following table provides information about the exposure to credit risk and Expected Credit Losses (‘ECLs’) for trade receivables and
amounts recoverable on contracts.
2024
2023
Group
Gross carrying
amount
£000
Provision for
impairment
£000
Gross carrying
amount
£000
Provision for
impairment
£000
Current (not past due)
19,788
–
17,901
–
1-30 days past due
2,567
–
2,349
–
31-60 days past due
302
21
265
7
61-90 days past due
12
–
41
11
More than 90 days past due
33
76
51
82
22,702
97
20,607
100
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables and amounts
recoverable on contracts as these items do not have a significant financing component.
The ECLs are based on the payment profile for sales over the past 48 months before 31 December 2024 and 31 December 2023 respectively
as well as the corresponding historical credit losses during that period. The historical ECLs are adjusted to reflect current and forwarding
looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding.
Trade receivables and amounts recoverable on contracts are written off (i.e. derecognised) when there is no reasonable expectation of
recovery.
In relation to amounts owed by Group Undertakings, based on historical experience and informed credit assessment, the ECL is not material.
Group
2024
£000
2023
£000
Provision brought forward
100
207
Provision on acquisition
–
133
Provision made
52
16
Provision released
(56)
(251)
Movement due to foreign exchange fluctuations
1
(5)
Provision carried forward
97
100
19. Cash and cash equivalents
Group
Company
2024
£000
2023
£000
2024
£000
2023
£000
Cash and cash equivalents – Group cash
38,556
30,949
18,721
16,548
Cash and cash equivalents – Client registration funds
2,895
1,881
–
–
41,451
32,830
18,721
16,548
The Group receives cash from clients, primarily in North America, for the purpose of payment of registration fees to regulatory bodies. This
cash is separately identified for reporting purposes and is unrestricted.
20. Trade and other payables
Group
Company
2024
£000
Restated*
2023
£000
2024
£000
2023
£000
Current liabilities:
Contract liabilities
17,863
15,669
–
–
Client registration funds on account
2,895
1,881
–
-
Trade payables
4,022
4,106
–
210
Other taxation and social security
1,841
1,730
88
–
Amounts owed to Group undertakings
–
–
14,098
21,181
VAT
2,305
998
–
–
Accruals
6,604
7,657
1,313
874
35,530
32,041
15,499
22,265
* An amount of £1,881,000, previously disclosed under ‘Contract liabilities’ is now presented under ‘Client registration funds on account’, reflecting a correction in the presentation to align
with the nature of the balances, which are amounts collected from clients for onward payment of registration fees, and which are payable to the client until such time as they are utilised.
The 2023 ‘Contract liabilities’ has been restated from £17,550,000 to £15,669,000.
Amounts owed to Group undertakings are unsecured and repayable on demand.
85
84 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
21. Provisions
Group
Dilapidations
£000
Restructuring
£000
Legal
£000
Other
£000
Total
£000
At 1 January 2023
706
40
351
–
1,097
Assumed in business combination
271
–
135
393
799
Disposed
–
–
–
(138)
(138)
Provisions made during the year
84
–
454
768
1,306
Provisions used during the year
(129)
(8)
(71)
–
(208)
Provisions reversed during the year
(83)
–
(289)
(34)
(406)
Effect of movement in exchange rates
(70)
–
(10)
–
(80)
At 1 January 2024
779
32
570
989
2,370
Provisions made during the year
64
35
24
420
543
Provisions used during the year
(55)
–
(71)
–
(126)
Provisions reversed during the year
(107)
–
(352)
(70)
(529)
Effect of movement in exchange rates
1
–
1
–
2
At 31 December 2024
682
67
172
1,339
2,260
Current liabilities
124
67
172
686
1,049
Non-current liabilities
558
–
–
653
1,211
At 31 December 2023
779
32
570
989
2,370
Current liabilities
387
32
570
492
1,481
Non-current liabilities
392
–
–
497
889
Dilapidation provisions have been recognised at the present value of the expected obligation. These discounts will unwind to their
undiscounted value over the remaining lives of the leases via a finance charge within the Income Statement.
The average remaining life of the leases as at 31 December 2024 is 3.5 years (2023: 2.7 years).
The restructuring provision relates to the costs associated with the closure of some non-trading Group entities.
Legal provisions reflect the best estimate of the future cost of responding to potential legal claims.
The other provision relates to a provision for the employer’s NIC liability on share options that have vested (or the proportion that have
vested). As the employee is contractually responsible for the employer’s NIC on any share options exercised and is required to remit this sum
to the Company prior to the share options being exercised, a corresponding asset is recognised in current assets. It also includes provisions
made in respect of product and services deliveries that include warranty provisions.
22. Called-up share capital
2024
£000
2023
£000
Allotted, called-up and fully paid
Ordinary shares of £0.01 each
462
462
Number
Number
Allotted, called-up and fully paid
Ordinary shares of £0.01 each
46,185,874
46,185,874
The allotted, called-up and fully paid share capital of the Company as at 31 December 2024 was 46,185,874 shares (2023: 46,185,874) and
the total number of ordinary shares in issue (excluding treasury shares) was 44,738,465 (2023: 45,458,972). The total number of voting rights
in the Company is 44,738,465 (2023: 45,458,972).
A reconciliation of treasury shares held by the Company is as follows:
Company
Reconciliation of treasury shares
2024
Number
2023
Number
At beginning of year
726,902
749,051
Purchase of own shares
1,080,507
961,385
Settlement of share options
(360,000)
(983,534)
At end of year
1,447,409
726,902
It is the intention of the Company to hold the treasury shares for the purpose of settling employee share schemes and for settling liquidated
sums of cash consideration in any future business acquisitions, and in limited circumstances to satisfy shareholder 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.
The total charge relating to employee share-based payment plans, all of which related to equity-settled share-based payment transactions,
was £2,272,000 (2023: £1,997,000).
Reconciliation of outstanding options
2024
2023
Number
Weighted
average
exercise price
(pence)
Number
Weighted
average
exercise price
(pence)
At beginning of year
2,717,990
1.0
3,365,323
1.0
Granted during the year
1,530,000
1.0
531,000
1.0
Exercised during the year
(360,000)
1.0
(1,018,333)
1.0
Lapsed during the year
(80,500)
1.0
(160,000)
1.0
At end of year
3,807,490
1.0
2,717,990
1.0
The Group has an employee share option scheme which awards options to certain employees. The Performance Share Plan (‘PSP’) sets the
target based on EPS over 3 years. The vesting period is 3 or 5 years. The Enhanced Executive Incentive Addendum (‘EEI’) options are for
Directors and senior managers. The vesting conditions for these awards is based on the share price. The vesting period for these awards is
5 years.
During the year ended 31 December 2024, share options were issued under the PSP and EEI.
The options outstanding at 31 December 2024 had a weighted average contractual life of 8.0 years (2023: 8.0 years).
Included within the total outstanding options at 31 December 2024 are 404,490 options which are exercisable (2023: 414,990). The weighted
average exercise price of exercisable options at the end of the year was 1.0 pence (2023: 1.0 pence).
Options exercised during the year had a weighted average share price at the date of exercise of 421.0 pence (2023: 400.0 pence).
Exercise of an option is subject to continued employment and normally lapses upon leaving employment.
The fair values of options granted under the PSP in 2024 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 have been
incorporated into the measurement by means of actuarial modelling. One vesting condition attached to options granted in the year is such
that 100% of the options vest dependent on the Company achieving earnings per share targets. For options granted in the year, a risk-free
rate of 4.29% and a dividend yield factor of 1.91% has been used. The share price on the date the options were granted was 419.0 pence.
The other principal assumptions used in the valuation are set out in the table below
The fair values of options granted under the EEI in 2024 were determined using the Monte Carlo valuation model that takes into account
factors specific to the share incentive plans including performance conditions. The performance condition attached to options granted in the
year is such that 100% of the options vest dependent on the Company achieving a share price hurdle target. The performance condition has
been incorporated into the measurement by means of actuarial modelling. For options granted in the year, a risk-free rate of 3.73% and a
dividend yield factor of 1.74% has been used for the options issued. The share price on the date the options were granted was 461.0 pence.
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.
87
86 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
22. Called-up share capital continued
At 31 December 2024, options granted to subscribe for ordinary shares of the Company that remain unexercised are as follows:
Option exercise period
Number of shares under option
Date of grant
From
To
Performance
Share Plan
Enhanced
Executive
Incentive
Addendum
Exercise
Price
(pence)
Fair
Value of
Options
(pence)
Expected
Life
(years)
Volatility
Sept 2018
Sep 2021
Sep 2028
9,990
–
1.0
225.3
10
23%
Oct 2019
Oct 2022
Oct 2029
20,000
–
1.0
177.8
10
17%
Nov 2019
Nov 2022
Nov 2029
20,000
–
1.0
211.7
10
18%
Oct 2020
Oct 2023
Oct 2030
52,500
–
1.0
222.3
10
23%
Oct 2021
Oct 2024
Oct 2031
302,000
–
1.0
435.8
10
31%
Oct 2021
Oct 2026
Oct 2031
–
1,050,000
1.0
245.7
10
31%
Mar 2022
Mar 2025
Mar 2032
30,000
–
1.0
382.4
10
31%
Sept 2022
Sept 2025
Sept 2032
352,000
–
1.0
377.6
10
27%
May 2023
May 2026
May 2033
396,000
–
1.0
388.4
10
24%
May 2023
May 2028
May 2033
45,000
–
1.0
379.0
10
24%
Jun 2023
Jun 2026
Jun 2033
15,000
–
1.0
382.4
10
23%
May 2024
May 2027
May 2034
315,000
–
1.0
395.0
10
17%
Aug 2024
Aug 2029
Aug 2034
–
1,200,000
1.0
144.1
10
18%
1,557,490
2,250,000
At 31 December 2023, options granted to subscribe for ordinary shares of the Company that remain unexercised were as follows:
Option exercise period
Number of shares under option
Date of grant
From
To
Performance
Share Plan
Enhanced
Executive
Incentive
Addendum
Exercise
Price
(pence)
Fair
Value of
Options
(pence)
Expected
Life
(years)
Volatility
Sept 2018
Sep 2021
Sep 2028
23,324
–
1.0
225.3
10
23%
Oct 2019
Oct 2022
Oct 2029
26,666
–
1.0
177.8
10
17%
Nov 2019
Nov 2022
Nov 2029
20,000
–
1.0
211.7
10
18%
Oct 2020
Oct 2023
Oct 2030
345,000
–
1.0
222.3
10
23%
Mar 2021
Mar 2024
Mar 2031
20,000
–
1.0
284.3
10
31%
Oct 2021
Oct 2024
Oct 2031
345,000
–
1.0
435.8
10
31%
Oct 2021
Oct 2026
Oct 2031
–
1,050,000
1.0
245.7
10
31%
Mar 2022
Mar 2025
Mar 2032
30,000
–
1.0
382.4
10
31%
Sept 2022
Sept 2025
Sept 2032
367,000
–
1.0
377.6
10
27%
May 2023
May 2026
May 2033
426,000
–
1.0
388.4
10
24%
May 2023
May 2028
May 2033
45,000
–
1.0
379.0
10
24%
Jun 2023
Jun 2026
Jun 2033
15,000
–
1.0
382.4
10
23%
Sept 2023
Sept 2026
Sept 2033
5,000
–
1.0
388.4
10
24%
1,667,990
1,050,000
23. Borrowings
(a) Term Loan
Group
2024
£000
2023
£000
Current bank borrowings
1,200
1,200
Non-current bank borrowings
10,572
11,756
Total borrowings
11,772
12,956
Group
2024
£000
2023
£000
Opening balance
12,956
14,139
Repayments in the year
(1,200)
(1,200)
Amortisation of loan arrangement fee
16
17
Total borrowings
11,772
12,956
Science Group plc, the Company, had no bank borrowings at the start nor the end of the year.
During the year ended 31 December 2016, the Group entered into a 10-year fixed Term Loan of £15.0 million which is secured on the
freehold properties of the Group and on which interest is payable based on SONIA plus 2.6% margin. During the year ended 31 December
2019, the Group increased this existing loan by £4.8 million to £17.5 million on similar terms. The repayment profile of the loan is £1.2 million
per annum over the term with the remaining balance repaid on expiry of the loan in 2026. Costs directly associated with entering into the
loan (including the loan increase), have been offset against the balance outstanding and are being amortised over the period of the loan.
During the year ended 31 December 2020, the Group drew a further £1.5 million of loan funds from the £17.5 million existing loan
agreement. This was on similar terms and with no change to the loan repayment profile (i.e. the quarterly repayments remained the same
and the loan balance remains payable on 30 September 2026). Costs directly associated with entering into the additional loan have been
offset against the balance outstanding and are being amortised over the period of the loan.
At 31 December 2024, the amount outstanding on the Term Loan was £11.8 million (2023: £13.0 million).
The carrying amount of the Term Loan is considered to be a reasonable approximation of the fair value.
The reconciliation of bank loans interest expense is shown below.
Group
2024
£000
2023
£000
Interest expense
463
499
Interest paid
(447)
(482)
Amortisation of loan arrangement fee
(16)
(17)
Interest accrual at the year end
–
–
In accordance with an agreed repayment schedule with the bank, bank borrowings are repayable to Lloyds Bank plc as follows:
Group
2024
£000
2023
£000
Within one year
1,200
1,200
Between 1 and 2 years
1,200
1,200
Between 2 and 5 years
9,400
10,600
11,800
13,000
On 19 March 2025 a refinancing of the existing Term Loan was announced. Further details can be found at Note 29.
(b) Revolving Credit Facility
In December 2021 Science Group plc signed a Revolving Credit Facility (‘RCF’) with Lloyds Bank plc in order to provide additional capital
resources to enable the execution of the Group’s acquisition strategy. The RCF is for up to £25.0 million, with an additional £5.0 million
accordion option. The original agreement was for a term of four years, however an option to extend the term by an additional year was taken
by the Group in December 2023 (meaning the term end date is now December 2026). The margin on drawn sums is 3.3% over the Sterling
Overnight Index Average (‘SONIA’) and is 1.1% per annum on undrawn amounts. Drawn amounts are secured on the Group’s assets by
debentures. The RCF is in addition to the Group’s existing Term Loan.
89
88 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
23. Borrowings continued
(b) Revolving Credit Facility continued
The RCF has two financial covenants with which the Group needs to comply if the facility is drawn: (i) the Group’s net leverage, as defined
as the net debt divided by the rolling 12 month EBITDA, should not exceed 2.5; and (ii) the Group’s interest cover, as defined as the rolling
12 month EBITDA divided by the rolling interest payments on all borrowings, should not be less than 4.0. Reporting is on a 6 monthly basis
unless the net leverage exceeds 2, in which case reporting moves to quarterly until net leverage returns to below 2 again. For the term of the
RCF, the previous covenants for the Term Loan are superseded by the covenants of the RCF and will not apply.
The reconciliation of RCF interest expense is shown below.
Group
2024
£000
2023
£000
Interest expense
349
349
Interest paid
(268)
(268)
Amortisation of RCF arrangement fee
(81)
(81)
Interest accrual at the year end
–
–
On 19 March 2025 a refinancing of the existing RCF was announced. Further details can be found at Note 29.
(c) Hedge accounting
In order to address interest rate risk, the Group entered into phased interest rate swaps in order to fully hedge the loan resulting in a 10-
year fixed effective interest rate of 3.5%. The interest rates on the swaps range from 0.4% to 1.3% which when combined with the margin on
the loan economically fix the finance cost at 3.5%.
Hedge effectiveness is determined at inception of the hedge relationship and at every reporting period end through the assessment of the
hedged items and hedging instrument to determine whether there is still an economic relationship between the two. The critical terms of
the interest rate swaps entered into exactly match the terms of the hedged item. As such the economic relationship and hedge effectiveness
are based on the qualitative factors and the use of a hypothetical derivative where appropriate.
Hedge ineffectiveness may arise where the critical terms of the forecast transaction no longer meet those of the hedging instrument,
however the hedged items and the hedging instrument relationship matches one to one. For example, if the payment of the loan and the
interest are transacted at different times, the hedge will become ineffective however the timing of the payments are within the control of
the Group. All derivative financial instruments used for hedge accounting are recognised initially at fair value and reported subsequently
at fair value in the consolidated statement of financial position. To the extent the hedge is effective, changes in the fair value of derivatives
designated as hedging instruments in cash flow hedges are recognised in other comprehensive income and included within the cash flow
hedge reserve in equity. Any ineffectiveness in the hedge relationship is recognised immediately in profit or loss. At the time the hedged item
affects profit or loss, any gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss and
presented as a reclassification adjustment within other comprehensive income. If a forecast transaction is no longer expected to occur, any
related gain or loss recognised in other comprehensive income is transferred immediately to profit or loss. If the hedging relationship ceases
to meet the effectiveness conditions, hedge accounting is discontinued, and the related gain or loss is held in the equity reserve until the
forecast transaction occurs.
The Group has adopted hedge accounting for the interest rate swaps under IFRS 9 Financial Instruments, and the loss on change in fair
value of the interest rate swaps of £0.3 million (2023: loss of £0.5 million) was recognised in other comprehensive income. The fair value of
the swap at 31 December 2024 was an asset of £0.6 million (2023: asset of £0.9 million).
The effects of the interest rate swaps on the Group’s financial position and performance are as follows:
Interest rate swaps
2024
2023
Carrying amount (non-current assets)
£627,000
£886,000
Notional amount
£11,800,000
£13,000,000
Maturity date
Sept 2026
Sept 2026
Hedge ratio
1:1
1:1
Change in the fair value of the outstanding hedging instruments since 1 January
£85,000
(£13,000)
Change in the fair value of hedged item used to determine hedge effectiveness
£85,000
(£13,000)
Weighted average hedged rate for the year
3.5%
3.5%
The notional amount on the interest rate swaps reduces in line with the repayment of the Term Loan, so an effective hedge remains
throughout the term of the loan. There are 4 active swaps in place at 31 December 2024, totalling £11.8 million. Of this total, £0.8 million will
mature in September 2025 and the remaining balance of £11.0 million will mature in September 2026.
(d) Changes in liabilities arising from financing activities
This section sets out an analysis of changes in liabilities from financing activities for each of the periods presented.
Group
Liabilities from financial activities
Other assets
Borrowings
£000
Leases
£000
Sub total
£000
Interest rate
swaps
£000
Total
£000
Balance at 1 January 2023
(14,139)
(1,882)
(16,021)
1,417
(14,604)
Cash movement
1,200
–
1,200
–
1,200
Principal elements of lease payments
–
912
912
–
912
Acquisitions – leases
–
(3,038)
(3,038)
–
(3,038)
Change in fair values
–
–
–
(531)
(531)
Foreign exchange adjustments
–
63
63
–
63
Interest expense
(499)
(235)
(734)
–
(734)
Interest payments (presented as operating cash flows)
482
235
717
–
717
Balance at 1 January 2024
(12,956)
(3,945)
(16,901)
886
(16,015)
Cash movement
1,200
–
1,200
–
1,200
Principal elements of lease payments
–
693
693
–
693
Additions – leases
–
(542)
(542)
–
(542)
Lease cancellations
–
88
88
–
88
Change in fair values
–
–
–
(259)
(259)
Foreign exchange adjustments
–
(17)
(17)
–
(17)
Interest expense
(463)
(158)
(621)
–
(621)
Interest payments (presented as operating cash flows)
447
158
605
–
605
Balance at 31 December 2024
(11,772)
(3,723)
(15,495)
627
(14,868)
24. Derivative financial instruments
The Group’s derivative financial instruments are measured at fair value and are summarised below:
Note
2024
£000
2023
£000
Non-current assets
Interest rate swaps - cash flow hedge
23
627
886
Total non-current derivative financial instruments
627
886
Current assets
US Dollar currency exchange instruments - cash flow hedge
144
301
Total current derivative financial instruments
144
301
91
90 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
24. Derivative financial instruments continued
The Group’s cashflow hedge reserve relates to the following hedging instruments:
Cash flow hedge reserve
Currency
exchange
instruments
£000
Interest
rate
swaps
£000
Total
£000
At 1 January 2023
122
1,038
1,160
Change in fair value of hedging instrument recognised in other comprehensive income
85
(14)
71
Reclassified from other comprehensive income to profit or loss
4
(517)
(513)
Net change in fair value of hedging instrument recognised in other comprehensive income
89
(531)
(442)
Deferred tax credit
15
132
147
At 1 January 2024
226
639
865
Change in fair value of hedging instrument recognised in other comprehensive income
(146)
283
137
Reclassified from other comprehensive income to profit or loss
(10)
(543)
(553)
Net change in fair value of hedging instrument recognised in other comprehensive income
(156)
(260)
(416)
Deferred tax credit
39
65
104
At 31 December 2024
109
444
553
The interest rate swaps are used to mitigate interest rate risk (see Note 23).
The Group uses currency exchange instruments to mitigate foreign exchange rate exposure arising from highly probable forecast sales in US
Dollars.
Hedge effectiveness is determined at inception of the hedge relationship and at every reporting period end through the assessment of the
hedged items and hedging instruments to determine whether there is still an economic relationship between the two.
The critical terms of the currency exchange instruments exactly match the terms of the hedged item. As such the economic relationship and
hedge effectiveness are based on the qualitative factors and the use of a hypothetical derivative where appropriate.
Hedge ineffectiveness may arise where the critical terms of the forecast transaction no longer meet those of the hedging instrument, for
example if there was a change in the timing of the forecast sales transactions from what was initially estimated or if the volume of currency in
the hedged item was below expectations leading to over-hedging.
The hedged items and the hedging instrument are denominated in the same currency and as a result the hedging ratio is always one to one.
All derivative financial instruments used for hedge accounting are recognised initially at fair value and reported subsequently at fair value in
the consolidated statement of financial position.
To the extent the hedge is effective, changes in the fair value of derivatives designated as hedging instruments in cash flow hedges are
recognised in other comprehensive income and included within the cash flow hedge reserve in equity. Any ineffectiveness in the hedge
relationship is recognised immediately in the income statement.
At the time the hedged item affects profit or loss, any gain or loss previously recognised in other comprehensive income is reclassified from
equity to profit or loss and presented as a reclassification adjustment within other comprehensive income.
If a forecast transaction is no longer expected to occur, any related gain or loss recognised in other comprehensive income is transferred
immediately to profit or loss. If the hedging relationship ceases to meet the effectiveness conditions, hedge accounting is discontinued, and
the related gain or loss is held in the equity reserve until the forecast transaction occurs.
The impact of the currency exchange instruments on the Consolidated Balance Sheet as at 31 December 2024 is, as follows:
Date of inception
22/11/2024
Carrying amount (current asset)
£107,000
Amount hedged per month (12 separate instruments, maturing December 2025)
$500,000
Hedge ratio
1:1
Strike price
$1.25 US Dollars per £1 Sterling
Change in the fair value of the currency exchange instruments since inception
(£29,000)
Change in the fair value of the hedged item used to determine hedge effectiveness
(£29,000)
Date of inception
9/12/2024
Carrying amount (current asset)
£37,000
Amount hedged per month (12 separate instruments, maturing December 2025)
$500,000
Hedge ratio
1:1
Strike price
$1.30 US Dollars per £1 Sterling
Change in the fair value of the currency exchange instruments since inception
(£37,000)
Change in the fair value of the hedged item used to determine hedge effectiveness
(£37,000)
25. Leases
a. Leases as lessee (IFRS 16)
The Group leases office facilities for periods between 2 and 10 years, based on the non-cancellable period.
At 31 December 2024, the leases had remaining periods of 1 to 8 years.
Right-of-use assets
Information about leases for which the Group is a lessee is presented below.
Group – Land and Buildings
2024
£000
2023
£000
Balance at 1 January
3,929
1,823
Additions
204
2,471
Lease amendment
408
449
Fair value adjustment
–
304
Disposals
(85)
–
Depreciation charge for the year
(865)
(1,053)
Effect of movements in exchange rates
14
(65)
Balance at 31 December
3,605
3,929
93
92 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Lease liabilities
Information about leases for which the Group is a lessee is presented below.
Group – Land and Buildings
2024
£000
2023
£000
Balance at 1 January
3,945
1,882
Additions
134
2,589
Amendment
408
449
Repayments in year
(693)
(912)
Lease cancellations
(88)
–
Effect of movements in exchange rates
17
(63)
Balance at 31 December
3,723
3,945
Lease liabilities are payable as follows:
31 December 2024
Within 1 year
£000
1-2 years
£000
2-3 years
£000
3-4 years
£000
4-5 years
£000
> 5 years
£000
Total
£000
Lease payments
1,021
1,010
560
414
370
1,106
4,481
Finance charges
(212)
(162)
(118)
(95)
(75)
(96)
(758)
Net present values
809
848
442
319
295
1,010
3,723
31 December 2023
Within 1 year
£000
1-2 years
£000
2-3 years
£000
3-4 years
£000
4-5 years
£000
> 5 years
£000
Total
£000
Lease payments
844
806
781
558
414
1,478
4,881
Finance charges
(218)
(185)
(151)
(119)
(95)
(168)
(936)
Net present values
626
621
630
439
319
1,310
3,945
b. Leases as lessor
The Group leases out some of the Harston site to third parties on leases which normally have a termination notice period of 3 to 6 months
and typically for a 36-month term.
The leases are classified as operating leases from a lessor perspective because they do not transfer substantially all the risk and rewards to
the ownership of the assets. Note 15 sets out information about the Harston leases and rental income recognised by the Group during the
periods presented.
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the
reporting date.
Operating leases under IFRS 16
2024
£000
2023
£000
Within one year
572
626
Between 1 and 2 years
315
587
Between 2 and 3 years
97
323
Between 3 and 4 years
–
100
Total
984
1,636
26. Contingent liabilities
At 31 December 2024, there were no contingent liabilities (2023: £nil).
27. Related party transactions
The Group provides support and consultancy services to its wholly owned 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
2024
Sale of goods
and services
£000
2024
Loans due
(to)/from
£000
2023
Sale of goods
and services
£000
2023
Loans due
(to)/from
£000
Frontier Smart Technologies Limited
358
2,817
579
3,775
Quadro Epsom Limited
–
1,014
–
–
Leatherhead Research Limited
–
437
–
–
Quadro Harston Limited
–
299
–
–
TP Group Limited
–
–
–
4,092
Critical Maritime Systems & Support Limited
717
–
273
580
TPG Services Limited
503
–
508
722
Osprey Consulting Services Limited
114
30
127
180
Sagentia Inc.
(25)
97
(13)
78
1,667
4,694
1,474
9,427
OTM Consulting Ltd
–
–
(177)
Sagentia Limited
(1,490)
(7,725)
(1,547)
(16,116)
Oakland Innovation Ltd
–
(178)
–
–
Quadro Harston Limited
61
–
25
(332)
Quadro Epsom Limited
63
–
25
(225)
Oakland Innovations Ltd
(65)
–
12
(72)
Leatherhead Research Limited
374
–
381
(79)
Technology Sciences Group Limited
632
(3,194)
653
(3,314)
TP Group Limited
–
(117)
–
–
TPG Services Limited
–
(49)
–
–
Critical Maritime Systems & Support Limited
–
(181)
–
–
Technology Sciences Group Inc.
360
(2,654)
312
(866)
(65)
(14,098)
(139)
(21,181)
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 Science Group plc Board.
Aggregate remuneration
Year ended 31 December
2024
£000
2023
£000
Short-term employee benefits (including social security costs)
1,533
1,586
Pension costs
42
42
Share-based payment transactions
587
541
2,162
2,169
95
94 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Notes to the Financial Statements continued
For the year ended 31 December 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
28. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Science Group makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
(a) Critical accounting estimate
Assessment of the percentage of completion of long-term contracts
The Group’s revenue recognition policy, which is set out in Note 2.18, requires forecasts to be made of the outcomes of long-term design
and manufacture contracts. This requires estimates of labour hours and rates, and material costs to determine forecast costs to completion
and therefore revenue recognition on each long-term contract. Where actual costs incurred differ to forecast costs, or where forecast cost
estimates change, the assessment of the percentage of completion of long-term contracts will be affected and therefore revenue and profits
or losses recognised impacted. Estimates are reviewed regularly throughout the contract life and adjustments are made based on the latest
available information.
As at 31 December 2024, at the Group level, the amounts due from contract customers and amounts due to contract customers amounted
to £4,283,000 and £17,863,000 respectively as set out in Note 5 although only the ‘Systems – Submarine Atmosphere Segment’ undertakes
material long-term contracts.
As at 31 December 2024, the amounts due from contract customers and amounts due to contract customers in respect of the Systems
– Submarine Atmosphere Management Segment amounted to £3,783,000 and £4,381,000 respectively. Given the nature of long-term
contracts undertaken by the business, the Forecast Costs to Complete (‘FCC’) are closely monitored with weekly and monthly project review
meetings. In the event that FCC were 10% higher than forecast at 31 December 2024 the revenue and adjusted operating profit for the year
ended 31 December 2024 would have been £333,000 lower.
Assessment of contracts subject to Ministry of Defence ('MOD') audit
It should be also noted that revenue recognisable on work performed under MOD procurement contracts is subject to audit of rates
applied for each year by MOD’s audit team. The Group judgement is not to recognise any non-finalised uplifts until the audit has been fully
completed as it is substantive in nature, and the outcome could lead to significantly different rates being applied through contract pricing
methodology. As a result of the substantive audits being complete, there may be a one-off adjustment to the revenue recognised in respect
of these projects.
The Group has considered the nature of the estimates involved in deriving these balances and concluded that it is possible that outcomes
within the next financial year may be different from the assumptions applied at 31 December 2024, which could require a material
adjustment to revenue and profits or losses recognised and the carrying amounts of the related assets and liabilities in the next financial
year.
Impairment of non-financial assets and goodwill
In assessing impairment, the Group estimates the recoverable amount of each asset or cash generating unit based on expected future
cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the
determination of a suitable discount rate (see Note 14).
(b) Significant accounting judgement
Accounting for freehold property at Harston Mill
Science Group owns and maintains the freehold property at Harston Mill for use in the supply of its business services and for administrative
purposes. Whilst there is remaining space on site not required to fulfil these activities, Science Group lets out space to third party tenants.
The revenues and costs attributable to this activity are disclosed as third party property income activities within the business segment
disclosures. It is not accounted for as an investment property, the reasons being:
(i)
the third party leases include the use of common areas and because of this the areas that are leased to third parties could not be sold
separately.
(ii)
the leases normally have notice periods of no more than six months giving Science Group the flexibility to start using the areas if
required, i.e., the leased areas are not held for capital appreciation or a return of investment through rental income.
Further information about the space let out to third party tenants is included in Note 15.
Recognition of deferred tax assets
The Group recognises deferred tax assets on carried forward unused tax losses to the extent that it is probable future taxable profits will be
available against which the tax losses can be utilised.
At 31 December 2024, the Group has recognised deferred tax assets amounting to £1.8 million (2023: £3.6 million) related to tax losses
carried forward (see Note 11). The deferred tax asset value is based upon an estimate of the next 2 years of respective taxable profits (or a
longer period where the use of losses is less restrictive), this being the period over which the Group has reasonable confidence in estimating
future taxable profits that meet the evidence requirement for deferred tax asset recognition purposes.
29. Post balance sheet events
Investment in Ricardo plc
On 28 February 2025 the Group announced an investment in Ricardo plc. Over the period 16 February 2025 to 27 February 2025, the Group
acquired 5.3 million shares in Ricardo plc equivalent to 8.5% of the voting rights. These shares were acquired at a total cost of £12.2 million
(including brokerage fees) at an average cost of 231 pence per share.
Share purchases continued and by 19 March 2025 the Group had increased its shareholding to 10.1 million shares, equivalent to 16.2% of
the voting rights. The total cost of shares acquired to date was £23.3 million (including brokerage fees). This investment was funded from the
Group’s existing cash resources.
The Group will engage with the Ricado plc board and its major shareholders in relation to managing this investment.
Refinancing of existing bank facilities
On 19 March 2025 the Group announced it had agreed new bank borrowing facilities with Lloyds Bank plc. The existing Term Loan and RCF
were scheduled to expire in September 2026 and December 2026 respectively.
There are now two new Term Loans for a combined value of £12.0 million, each for 10 years expiring in March 2035. Each loan is secured
solely and individually against the Group’s freehold properties: one loan to the property in Harston, near Cambridge, and, a second,
independent loan to the property in Epsom, Surrey.
The new, increased RCF is for £30.0 million, for a period of 5 years expiring in March 2030, an increase of £5.0 million over the 2021 RCF. The
RCF also has a £10.0 million accordion, a further increase of £5.0 million over the 2021 RCF. The RCF is currently undrawn and therefore no
covenants apply.
97
96 Annual Report and Financial Statements 2024
Annual Report and Financial Statements 2024
FINANCIAL STATEMENTS
Harston Mill
Harston
Cambridge
CB22 7GG
T +44 1223 875200
E info@sciencegroup.com
www.sciencegroup.com