4th Mar 2015 11:04
LONDON (Alliance News) - Sagentia Group PLC Wednesday reported a fall in 2014 pretax profit as revenue was hit by the wind-down of its outsourced IT services business Manage5Nines Ltd, but it raised its dividend for the year almost fourfold after deciding that a cash return wouldn't attract a big take-up.
Sagentia, which provides research and development consultancy services for the development of products, technology and intellectual property, posted a pretax profit of GBP4.2 million for 2014, down from GBP4.9 million in 2013, as a decline in revenue to GBP28.3 million from GBP30.6 million was only partly offset by lower operating expenses.
It said it faced a challenging start to 2014, although its consultancy business returned to organic growth in the second half of the year.
It had decided to wind-down Manage5Nines at the end of 2013 as the legacy business was facing an increasingly challenging market. It did this in the first half of 2014, meaning the business only contributed GBP0.2 million of revenue in the year, down from GBP1.1 million in 2013.
Currency movements also wiped GBP0.8 million off the revenue figure and GBP0.7 million off operating profit, it said. About half the company's revenue is denominated in dollars.
Early this year, Sagentia acquired Cambridge-based research and development consultancy Oakland Innovation Ltd for GBP5.0 million, but that came too late to affect the 2014 results.
Sagentia had reviewed its cash requirements in the light of strong operational cash generation and the lack of a major acquisition. It had considered a return of cash to shareholders, but after its brokers consulted with a number of major shareholders, it became apparent that takeup would be limited.
It has decided to raise its 2014 dividend to 4.0 pence instead, from 1.1p for 2013, as a total cost of GBP1.5 million, up from GBP0.4 million. It will continue paying one dividend a year and will review its dividend policy if it makes a major acquisition.
Its gross cash position at the end of 2014 was GBP23.8 million, up from GBP22.4 million at the end of 2013. Net cash generated from operating activities was GBP4.9 million, up from GBP3.9 million in 2013.
Like many small-cap companies, Sagentia struggles with a lack of liquidity in its stock, although it wants to retain its listing because it's still the most cost-effective way of raising capital if it needs it.
It will therefore again seek permission to buy up to 10% of its issued share capital so that it can undertake some share purchases this year if deemed appropriate. However, accepting that share buybacks also exacerbate liquidity issues, it will also seek permission to sell treasury shares bought through the buyback programme, limited to 10% of its issued share capital. The sale of treasury shares is generally used for small fund raisings, but could also be used to help supply-side liquidity.
"The board believe that this share liquidity programme, addressing both buy-side and sell-side liquidity, offers a potentially attractive mitigation to institutional investor concerns regarding small cap investments," it said.
Shares in Sagentia are trading up 0.4% at 139.00 pence Wednesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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