3rd Mar 2020 11:08
(Alliance News) - Science Group PLC on Tuesday said it swung to a loss in 2019, pulled down by the cost of acquiring Frontier Smart Technologies.
Shares in science and technology-based consultancy firm Science Group were down 9.3% in London in morning trading at 212.20 pence.
Science Group made its first on-market purchase of Frontier Smart Technologies Group Ltd shares in May 2019, and by July 11 its ownership was at 36%.
It continued to buy shares and made an offer priced at 35 pence per share which gave Science Group a 48% ownership. After a share issue by Frontier Smart and more market purchases, Science Group's stake rose to 72%.
Finally, after a statutory merger, all remaining shares were purchased and Science Group took full ownership of the business. In total, acquisition and integration costs of GBP3.6 million were incurred in 2019 for Frontier Smart, compared to just GBP76,000 of acquisition and integration costs in 2018.
As a consequence of this, although revenue was 17% higher at GBP57.2 million from GBP48.7 million, the company reported a GBP1.6 million pretax loss in 2019 compared to a GBP4.9 million profit the prior year.
Thus, Science Group has recommended maintaining its dividend at 4.6p per share.
Chair Martyn Ratcliffe said: "The strategy of enhancing the organic development of the group through acquisitions has created a financially and operationally resilient organisation. The acquisition of Frontier Smart Technologies Group Ltd was again funded primarily from the group's existing cash resources, minimising shareholder dilution. This strategy has delivered a substantial increase in scale, profit and the asset base of the group, with offices in UK, Europe, North America and Asia, serving a range of vertical markets including medical, consumer, food & beverage and industrial sectors."
Ratcliffe also commented on the coronavirus outbreak, saying: "The substantial reduction in the cost base resulting from the accelerated integration/restructuring programme, should enable Frontier performance to recover in 2020. However, the impact of the coronavirus (covid-19) outbreak is uncertain, a global challenge particularly affecting production facilities in China where Frontier and Frontier customers manufacture their products. The Frontier manufacturing facility was temporarily closed but has now been partially reopened following approval from the local authority. The situation remains under close review."
By Anna Farley; [email protected]
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