Science Group Regulatory News (SAG)

SAGENTIA GROUP PLC

("Sagentia" or the "Group")

AUDITED RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2012

Sagentia Group plc is an international technology consulting company providing outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacturing for the medical and commercial markets.

Summary

Media enquiries:

Chairman's Statement

In the more difficult economic environment of the past year, Sagentia reports a very satisfactory operating performance for the year ended 31 December 2012, maintaining strong operating margins and cash flow. While the first half of the year was made more challenging by a large customer deciding not to continue with a project, the latter part of the year was particularly strong resulting in a return to both sequential and year-on-year growth.

Despite the significant challenges early in the year, Consultancy Fees for the year as a whole only declined by 1%, due to the recovery in the second half of the year which recorded revenue growth of 5.6% on the prior year and 9.1% on the first half of 2012. As anticipated, Product and Licence income declined on a comparative basis mainly due to 2011 benefiting from a one-off pre-production product manufacture for a European customer. As a result, Group revenues decreased by 5.5% to £22.3 million (2011: £23.6 million). However, operating profit, before the one-off charge related to the resignation of the Group's Chief Executive Officer in October 2012, remained unchanged at £3.9 million, a very strong operating margin of 17.6% (2011: 16.6%), and the corresponding adjusted profit before tax from continuing operations increased by 2.6% to £3.4 million (2011: £3.3 million). Statutory profit before tax from continuing operations decreased by 10.4% to £3.0 million (2011: £3.4 million) due to the one-off charge referred to above. With significant tax losses carried forward, the Board anticipates tax liabilities to be limited for the foreseeable future.

During the year, the Group undertook an active share buyback programme, acquiring 5.4 million of its own shares, equivalent to 12.8% of the issued share capital, at a total cost of £4.5 million. Even after this significant return of capital to shareholders, due to continued focus on cash conversion and working capital, the cash balance at 31 December 2012 was £19.2 million (2011: £21.2 million), and net funds were £12.9 million (2011: £14.1 million). The balance sheet continues to be very strong with Shareholders Funds of £25.3 million (2011: £26.4 million), approximately equal to the sum of the Group's cash balances and the carrying value of the Group's freehold property in Harston, net of the associated bank loan. Shareholders' Funds per share, based on the shares in issue (excluding shares held in treasury) at 31 December 2012 were 68.9 pence (2011: 63.1 pence), benefitting from both the continued strong profitability of the Group and the reduction in shares in issue following the buy-back programme.

Operational Review

Sagentia's operations are based primarily in Harston, near Cambridge, UK. In November 2012 the Group relocated its US operation from Cambridge, Massachusetts, to Boston, in order to better support its North American customer base and enable continued expansion of the US operations, from which broadly half of the Group's revenue is derived. Most of the Group's consultants are managed through five skill groups (Science & Technology, Embedded Software, Mechanical Engineering and Design, Innovation Technology Management, and Project Management) and are deployed onto projects as required, providing the Group with the benefits of scale, customers with access to a breadth of science and engineering experience, and Sagentia's employees with a diversity of technical challenges. Support functions (e.g. finance, HR, marketing and IT) are managed centrally to maximise the benefits of scale from shared resources. Group headcount, excluding contract resources (approximately 40), at 31 December 2012 was 155, of which approximately 76% were fee-earning consultants (31 December 2011: 153 and approximately 27 contract resources).

In 2012, the top five clients accounted for approximately 46% (2011: 52%) and the top ten clients for approximately 64% (2011: 67%), of the Core Business revenues. The changes in revenue profile reflect a project suspension (see below) and also an increase in the average revenue achieved per client. This reflects the increasing focus on strategic sales initiatives by the Group and an emphasis on effective account management, balancing client concentration with reducing the cost of sale.

As noted above, in early 2012 a large Medical project in North America was suspended, impacting the first half of the year. As a result, revenue from Medical customers decreased to £10.5 million (2011: £14.0 million) and accounted for approximately 53% of Group Core Business revenue for the year (2011: 68%). Projects in the Medical market are generally for large corporate or well-financed start-up organisations and therefore, while these large projects generally tend to provide Sagentia with greater demand visibility, they do also result in greater customer concentration and changed priorities by clients may impact on Sagentia's performance at short notice. The global medical market continues to be dominated by North American companies and approximately 64% of the revenue derived from Sagentia's Medical customers was sourced from North America (2011: 76%).

However, Sagentia reported strong growth of approximately 38% to £9.1 million (2011 : £6.6 million) from the Group's Commercial customers. While the average project size from Commercial customers is generally smaller than for Medical projects, Sagentia has strong customer relationships with considerable repeat business from a number of large international organisations. Furthermore, the multi-year contract with a North American consumer products group awarded in 2011 combined with a new major customer in the Oil & Gas sector, resulted in the Group's top two clients by revenue being derived from the Commercial market. As a result, Commercial customers accounted for approximately 47% of the Group's Core Business revenue (2011: 32.0%) in the year.

Board and Management Changes

In October 2012, after three years in the post, Brent Hudson stood down as Chief Executive Officer. Mr Hudson made a significant contribution to the successful turnaround of the Group and the Board wishes him well for the future. An exceptional charge of £435k is included in the income statement for the year relating to associated one-off charges, reflecting the settlement of contractual obligations by the Company and a discounted settlement of vested share options that could otherwise have been exercised.

Following Mr Hudson's resignation, Martyn Ratcliffe was appointed as Executive Chairman, with Mick Withers and Dan Edwards, formerly Head of the Medical and Commercial market groups respectively, being promoted to Joint Managing Directors of Sagentia Limited, the consultancy operating company, with responsibility for the day-to-day activities of the Group.

In October 2012 the Group also welcomed Michael Lacey-Solymar to the Board as a Non-Executive Director. Mr Lacey-Solymar has over twenty-five years' corporate finance experience, having spent eighteen years at UBS and seven years at Investec and his appointment is consistent with the Board's continued evaluation of acquisition opportunities.

Annual General Meeting

The Annual General Meeting ("AGM") will be held on 15th May 2013. In light of the Group's strong balance sheet and consistent performance, and responding to some shareholder representations, the Board considers that it is now appropriate for the Company to commence paying dividends. The Board recommends a dividend of 1.0 pence per share (2011: nil), which subject to shareholder approval, will be payable on 7th June 2013 to shareholders on the register at the close of business on 17th May 2013. In future, the Board anticipates recommending a single dividend being paid each year.

The Board will also seek approval from Shareholders at the AGM for authority to acquire up to 10% of the issued share capital of the Company so that, if deemed appropriate and in the best interests of shareholders, the Company may undertake further share purchases in the coming year. This authority will be conditional on the passing of a general authority Panel Waiver by shareholders and on Takeover Panel approval of a waiver of Rule 9 of the UK Code on Takeovers and Mergers

Finally, the Board has undertaken a review of the Group's share option schemes and, in accordance with standard practice, the Board is proposing to revise the scheme rules to allow for the cashless exercise of options by option holders and to introduce a new Performance Share Plan. The Board will seek approval from Shareholders at the AGM.

Prospects

In summary, 2012 had a difficult start to the year, with the Group experiencing the effects of the deterioration in the macro-economic environment and the Medical project being discontinued. The very satisfactory performance of the Group in terms of profitability and cash flow is therefore a credit to the management and staff of Sagentia. Furthermore, with greater focus on developing strategic market opportunities and targeted investment, together with the significant performance improvement in the Commercial customer segment, the second half of 2012 returned to revenue growth and provides a platform for the year ahead.

For a technology consultancy business of Sagentia's size, the Group's operating margins are towards the upper end of its peer group. Even in the more difficult market environment of the past year, these strong margins have been maintained. However, the Board is committed to balancing operating margin and investment in order that the Group's performance is sustained and shareholder value is enhanced over the medium term. As such, while in the current economic climate the Board will remain cautious and prudent in managing the business, Sagentia continues to explore and invest in growth opportunities.

The Board also continues to evaluate acquisition opportunities to accelerate the growth of the Group. During the year, numerous potential acquisitions were considered, including both listed and private companies and, in February 2013, Sagentia acquired QDA Limited, a small Cambridge based industrial design company, consideration for which is based primarily on earn-out targets being achieved over the next three years. Sagentia remains active in its pursuit of attractive acquisition opportunities and, although there can be no certainty that any transaction will occur, the Board is currently in discussions regarding a number of potential opportunities.

Martyn Ratcliffe

Chairman

1 March 2013

Financial Review

In the twelve months ended 31 December 2012, the Group generated revenue of £22.3 million (2011: £23.6 million) with the main reduction being in Product and Licence Income, while Consultancy Fees held broadly flat with just a 1% reduction and growth returning in the second half of the year. Operating profit, before the one-off charge related to the resignation of the Chief Executive Officer in October 2012, remained unchanged at £3.9 million, an operating margin of 17.6% (2011: 16.6%), and the corresponding adjusted profit before tax from continuing operations increased by 2.6% to £3.4 million (2011: £3.3 million). Statutory profit before tax from continuing operations decreased by 10.4% to £3.0 million (2011: £3.3 million) due to the one-off charge referred to above.

Due to the significant tax losses carried forward in the UK and US subsidiaries, approximately £23.0 million at 31 December 2012, (2011: £24.5 million), the tax liabilities on profits are anticipated to be minimal and relate largely to the profits generated on the property rental activities at Harston Mill.

Based on the average number of shares in issue during the year, basic earnings per share from continuing operations increased to 7.9 pence (2011: 7.8 pence) and diluted earnings per share from continuing operations increased to 7.5 pence (2011: 7.3 pence). After stripping out the effect of the one-off charge in the year, diluted earnings per share from continuing operations increased to 8.5 pence, a 16% year-on-year increase.

The Group reports its results under two business segments (see Note 2). The 'Core Business' represents all revenues derived from R&D Consultancy (comprising Technology Consultancy Fees and project expenses recharged on R&D Consultancy projects) and revenues from product sales and licence income. The 'Other' segment comprises Fees and recharged project expenses derived from outsourced IT services (Manage5Nines Limited, a wholly owned subsidiary) and property income.

Revenue from Core Business activities declined by 6.4% to £19.6 million, compared with £20.9 million in 2011, although, as noted above, Consultancy Fees were down just 1% and returned to growth in the second half of the year. Revenue from Core Business operations includes materials used in projects recharged to customers of £1.5 million (2011: £1.8 million), and product and licence revenue of £0.2 million (2011: £1.1 million). The year-on-year decline reflects one-off product sales in 2011, not repeated in 2012, as well as a reduction in licence income in the second half of 2012 as a number of legacy licence agreements reached their termination dates.

Other revenue includes property income from rental space let in the Harston Mill facility of £1.4 million (2011: £1.4 million). The Harston Mill property currently has a total of 10 tenants (2011: 12 tenants). Approximately 7,700 square feet, or 25% of the total lettable area became available at the beginning of 2013 and is currently being marketed. Other revenue also includes IT Support (including materials) through Manage5Nines Limited totalling £1.3 million (2011: £1.3 million).

The Group has a strong balance sheet with Shareholders' Funds at 31 December 2012 of £25.3 million, equivalent to 68.9 pence per share (2011: Shareholders' Funds of £26.4 million equivalent to 63.1 pence per share), representing an 9.2% year-on-year increase in Shareholders' Funds per share. The gross cash position at 31 December 2012 was £19.2 million (2011: £21.2 million) and net funds were £12.9 million (2011: £14.1 million), after the share buy-back costs of £4.5 million and repayments on the bank loan of £0.8 million. Net cash generated from operating activities was £3.7 million (2011: £4.7 million) and debtor days were 31 days (2011: 44 days). The loan balance of £6.2 million at 31 December 2012 (2011: £7.0 million) is secured on the freehold property and associated lease structure and, subject to a minimum cash balance, is not subject to covenants related to the operating performance of the Consultancy business. It should be noted that, as in previous years, the year-end cash position is enhanced by seasonal factors, particularly management and employee bonus payments accrued in 2012 and payable in March 2013.

Following approval at the Annual General Meeting in April 2012, the Company has since acquired 5.4 million of its own shares for £4.5 million in a share buyback at an average price of 82.8 pence per share. The Company has also issued 0.2 million shares by way of settlement of exercised share options during the year. The net effect is that there has been a net reduction in the issued share capital (excluding treasury shares) of 12.8% from 42,042,035 to 36,665,591.

Neil Elton

Finance Director

1 March 2013

Sagentia Group plc

Consolidated Income Statement

For the year ended 31 December 2012

Sagentia Group plc

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2012

Sagentia Group plc

Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

The Merger reserve arose as a consequence of a Group reorganisation. In 2008 Sagentia Group plc acquired Sagentia Group AG by way of a share for share exchange. Sagentia Group AG was liquidated during 2011 as a result of which the Merger reserve was reduced to £10.3 million and cumulative translation differences of £0.7 million have been recycled to the consolidated income statement as a loss from discontinued operations.

Sagentia Group plc

Consolidated Balance Sheet

For the year ended 31 December 2012

Sagentia Group plc

Consolidated Statement of Cash Flows

For the year ended 31 December 2012

Extracts from notes to the financial statements

1 General Information

Sagentia Group plc (the 'Company') and its subsidiaries (together 'Sagentia' or 'Group') is an international technology consulting group providing outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacturing and the development and exploitation of intellectual property.

The Company is the ultimate parent company in which results of all Sagentia companies are consolidated. The Company was incorporated on 17 March 2008 in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. Sagentia Group AG was liquidated in 2011.

Sagentia develops new and novel technologies in the Medical (Diagnostics, Patient Care and Surgical) and Commercial (Industrial and Consumer) industries. Its key areas of expertise include: engineering, electronics, life sciences, business innovation, and materials. Sagentia's facilities include offices and laboratories located in Europe in Cambridge and in the US in Boston, Massachusetts.

The Group and Company accounts of Sagentia Group plc were prepared under IFRS as adopted by the European Union, and have been audited by Grant Thornton UK LLP. Accounts are available from the company's registered office; Harston Mill, Harston, Cambridge, CB22 7GG.

The Company is incorporated in England and Wales and has its primary listing on the AIM Market of the London Stock Exchange (SAG.L). The value of Sagentia Group plc shares, as quoted on the London Stock Exchange plc at 31 December 2012, was 91.5 pence per share (31 December 2011: 87.5 pence).

2 Segment Information

Sagentia is organised on a worldwide basis into two segments, Core Business and Other. Core Business activities include the two industry sectors (Medical and Commercial) which Sagentia services and includes all Consultancy fees for services operations, including recharged expenses and product/licence revenue generated directly from these activities. 'Other' activities include rental income from Harston Mill and income from the provision of external IT services. The segmental analysis is reviewed up to operating profit. Other resources are shared across the Group.

Revenue and non-current assets by geographical area are as follows:

For the purpose of the analysis of revenue, geographical markets are defined as the country or area in which the client is based. Non-current assets are allocated based on their physical location.

During 2012, £2.2 million or 11% (2011: £3.8 million; 18%) of the Group's revenues depended on a single customer in the Core Business segment, based in North America.

3 Operating expenses

* R&D costs are represented by staff and material costs incurred in relation to third party R&D projects

4 Income Tax

The tax (charge) / credit comprises:

The tax on Sagentia's profit before tax differs from the theoretical amount that would arise using the weighted average statutory tax rate applicable to profits of the consolidated companies as follows:

The weighted average statutory applicable tax rate was 24.5% (2011: 26.7%).

The Group has available tax losses of approximately £23.0 million (2011: £24.5 million).

5 Earnings per share

The calculation of earnings per share is based on the following result and numbers of shares:

The profit for the 2011 financial year (including discontinued operations) is stated after the recycling of accumulated translation reserves through the income statement following the liquidation of Sagentia Group AG in 2011.

Basic earnings per share for continuing operations in 2012 were 7.9 pence (2011: 7.8 pence). Fully diluted earnings per share from continuing operations were 7.5 pence (2011: 7.3 pence).

6. Trade and other receivables

All amounts disclosed above are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value.

All of Sagentia's trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were considered to be impaired and a provision of £121,000 (2011: £57,000) has been provided at 31 December. In addition, some of the unimpaired trade receivables are past due as at the reporting date.

The age of trade receivables overdue but not impaired is as follows:

7. Current Liabilities

8. Other non-current liabilities

9. Called-up share capital

On 28 November 2011 the Company announced that an application had been made to the London Stock Exchange for the admission to trading on AIM of a blocklisting of 318,440 ordinary shares of 1 pence each. During the year ended 31 December 2012 the Company allotted the remaining balance of 200,940 ordinary shares issued under this blocklisting in settlement of the exercise of various options. As a result the allotted, called-up and fully paid share capital of the Company increased from 41,841,095 as at 31 December 2011 to 42,042,035 shares as at 31 December 2012.

During the year the Company purchased 5,385,555 of its 1 pence ordinary shares for an average price of 82.8 pence per share which it held in treasury. Of the ordinary shares held in treasury the Company re-issued 9,111 shares in settlement of the exercise of share options.

As at 31 December 2012 the total number of ordinary shares in issue (excluding treasury shares) was 36,665,591 and the number of treasury shares held was 5,376,444 equivalent to 12.8% of the Company's issued share capital. It is the intention of the Company to hold the treasury shares for the purpose of settling employee share schemes and in consideration for any future business acquisitions. No dividend or other distribution may be made to the Company in respect of the treasury shares.

10. Statement by the directors

The preliminary results for the year ended 31 December 2012 and the results for the year ended 31 December 2011 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS"). The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2012.

The financial information set out above, which was approved by the Board on 1 March 2013, is derived from the full Group accounts for the year ended 31 December 2012 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2012, will be delivered to the Registrar of Companies in due course.

The Board of Sagentia approved the release of this audited preliminary announcement on 1 March 2013.

The Annual Report for the year ended 31 December 2012 will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company. The report will also be available on the investor relations page of the Group's website.

Further copies will be available on request and free of charge from the Company Secretary.

- Ends -