Science Group trading well despite global slowdown

Science Group said in a trading update on Thursday that, despite the deterioration in the global economy, it had experienced “resilience” derived from its sector and international diversity.

The AIM-traded firm said that as expected, while some market sectors, particularly medical, were continuing to invest, consumer-oriented sectors in both services and products were being impacted by the global economic slowdown.

It said that with a “significant proportion” of income generated in dollars, it had benefited from the relative strength of the US currency, offsetting the “significant increase” in energy prices and other cost inflation.

In total, the board said it expected revenue and adjusted operating profit for 2022 would be “slightly ahead” of current board expectations.

“Science Group continues to be highly cash generative,” the directors said, adding that as at 30 November, the group had gross cash of £44.5m and net funds of £30.1m.

“Science Group currently has limited exposure to future interest rate increases.

“The group's term loan, which expires in 2026, is fixed through a swap instrument at an effective rate of 3.5%.

“In addition, the group's revolving credit facility of £25 million, taken out in 2021 on a four-year term with one-year extension, remains undrawn.”

Science Group said its strong balance sheet, with significant cash resources, provided a “robust foundation” in the current macroeconomic environment while also enabling Science Group to benefit from corporate opportunities which may arise.

“During 2022, in view of the currency volatility, the board has taken the opportunity to procure a currency exchange instrument to cap the sterling-dollar rate in relation to the research and development consultancy division through to the end of 2023.

“Initially the sterling-dollar cap was set at 1.30, but during October the board took advantage of the very low exchange rates to improve the cap to 1.20.

“The instrument, which applies to $1.25m per month, still enables the business to benefit from lower exchange rates, should such rates apply.”

Looking ahead, Science Group said that while the global economic climate would continue to impact consumer-facing sectors in the year ahead, its sector diversity should continue to provide resilience.

“The completion of the TP Group acquisition should further strengthen the group through the entry into the defence market, together with synergistic opportunities for growth in the medium term.#

“Since the TP Group acquisition is funded through existing cash resources with minimal shareholder dilution, if completed as now expected, the board anticipates that the acquisition will be earnings enhancing in 2023.”

At 1317 GMT, shares in Science Group were up 3.95% at 395p.

Reporting by Josh White for Sharecast.com.