Science Group PLC Business Update (7581K)
06 Septiembre 2021 - 1:00AM
UK Regulatory
TIDMSAG TIDMTPG
RNS Number : 7581K
Science Group PLC
06 September 2021
6 September 2021
SCIENCE GROUP PLC
('Science Group' or the 'Group')
Business Update
Science Group reported record Interim Results on 26 July 2021
with adjusted earnings per share growth of 51% compared with the
prior year and 125% compared with the first half of 2019 prior to
the pandemic. The Board's expectations for 2021 were upgraded for
the second time this year at the Interim Results and the resilient
performance of the Group's operating divisions has continued over
the summer, providing confidence for the remainder of the year.
At 30 June 2021, the Group had gross cash of GBP29.0 million.
Since that time, the Group has invested
-- $6.0 million (approx. GBP4.3 million) to buy out the future
royalty costs related to Frontier products, an earnings enhancing
transaction in both the current year and the future;and
-- Between 9 and 31 August 2021, GBP11.0 million in acquiring over 24% of TP Group plc
At 31 August 2021, after the above investments, Science Group
had gross cash of GBP17.2 million, reflecting the continuing strong
cash generation of the Group's business operations.
Corporate Strategy and Capital Structure
On 24 January 2019, the Board set out the results of the Group's
strategic review, which incorporated discussion with major
institutional shareholders. This review concluded that the Board
should pursue a broad strategic agenda to deploy the Group's
capital and management resources in order to deliver value to
Science Group shareholders. The strategy has been demonstrably
successful.
In each of the Group's operating divisions, the Board continues
to invest in organic business development opportunities whilst also
exploring add-on acquisitions. As demonstrated throughout the past
decade, these smaller acquisitions can be funded through the strong
cash generation of the Group's businesses and existing debt
facilities. This model has delivered substantial returns for
shareholders with nil net shareholder dilution over the past
decade.
Following the strategic review, the Board has also explored
larger opportunities to increase the scale of the Group as
evidenced by the successful stakebuilding, acquisition and
turnaround of Frontier Smart Technologies. Similarly, the 2019
review identified that strategic investments may be an appropriate
model within the Group's strategy (see below in relation to TP
Group plc). In order to facilitate these opportunities, which
invariably require immediate access to capital resources, the Board
continually reviews the most appropriate capital structure for the
Group.
At 30 June 2021, the Group's long-term bank debt was GBP16
million. This facility, secured on the Group's significant freehold
property assets extends to 2026. The Group's freeholds were valued
in March 2021 at between GBP23 million and GBP35 million. However,
with such consistently strong performance, even through the Covid
pandemic, and robust cash generation from the Group's operations,
the Board is now considering a new debt facility in order to
increase capital efficiency and enable Science Group shareholders
to benefit from an increase in leverage.
Furthermore, and as set out in the Group's 2019 strategic
review, from time to time the Board considers the merits of
broadening the shareholder base, and thereby enhance liquidity,
through an increase in equity capital. In considering the possible
expansion of the Group's equity capital, the Board will prioritise
the interests of existing shareholders and, as evidenced over the
past decade, will carefully consider the impact of shareholder
dilution. Such prudence benefits all shareholders of Science Group,
both long-standing and new investors who can be assured of
continued alignment of Board and shareholder interests.
Strategic Investment in TP Group plc
Consistent with the 2019 strategic review, during 2021 Science
Group approached TP Group in relation to a strategic investment and
subsequently also proposed a potential acquisition of TP Group. The
TP Group Board rejected all attempts to engage and Science Group
therefore acquired its initial shareholding on 9 August 2021,
progressively increasing to the current level of over 24%. An
indicative proposal for a potential offer at 6.5 pence per share
was made to the Board of TP Group, a premium of 67% to the TP Group
share price prior to Science Group's initial investment.
On 16 August 2021, one week after making the initial investment,
Science Group informed shareholders of both companies that the
strategic investment model was increasingly likely and this
scenario was consistently reiterated. In parallel, Science Group
continued to explore the potential offer which was always subject
to certain pre-conditions, including the completion of satisfactory
due diligence which was not forthcoming. Accordingly, the potential
offer was withdrawn as announced on 3 September 2021.
Therefore, as indicated in mid-August, the Science Group
strategy is to manage its strategic investment in TP Group in an
active manner. To that end, Science Group requisitioned the Board
of TP Group to call a general meeting of TP Group shareholders to
consider the constitution of the TP Group Board, including (i) the
removal of two TP Group directors who have presided over the poor
performance of the company in recent years and (ii) the nomination
of two directors from Science Group who have a demonstrated track
record of delivering value to shareholders. The TP Group general
meeting is anticipated to be held within the next few weeks.
Science Group will be voting its entire shareholding at the time of
the general meeting (anticipated to be in excess of 24.1%) as set
out above. Science Group is not restricted from increasing its
shareholding up to 29.9% nor as to the price at which additional
shares are purchased.
Enquiries:
Tel: +44 (0) 1223
Science Group plc 875 200
Martyn Ratcliffe, Chairman www.sciencegroup.com
Stifel Nicolaus Europe Limited (Nominated
Adviser and Joint Broker)
Tel: +44 (0) 20 7710
Nick Adams, Alex Price 7600
Liberum Capital Limited (Joint Broker)
Tel: +44 (0) 20 3100
Neil Patel, Cameron Duncan 2000
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