Science Group reports record profit on Ricardo investment

Science Group plc (AIM:SAG) reported a substantial increase in profit before tax to £32.2 million for the first half of 2025, up from £7.6 million year-over-year, primarily driven by a £24 million gain from its investment in Ricardo plc. The company also saw revenue rise to £57.2 million and significantly strengthened its cash position to £82.0 million. With strong performance in its Systems businesses offsetting Professional Services, Science Group stated it is well positioned for the full year and will continue to evaluate corporate opportunities.

Analysis

Science Group plc's (AIM:SAG) first-half 2025 results are dominated by a substantial, but non-recurring, corporate action. The reported surge in profit before tax to £32.2 million from £7.6 million year-over-year is primarily attributable to a £24.0 million gain from the sale of its 21.8% stake in Ricardo plc, which generated a 74.2% return on investment. A more accurate reflection of core operational performance is the modest increase in adjusted operating profit to £11.3 million from £11.0 million, and the 6.6% rise in adjusted basic EPS to 19.3 pence. The results reveal a mixed performance at the divisional level, with strength in the Systems businesses offsetting a revenue decline in the Professional Services division to £33.2 million from £36.5 million; however, this division maintained strong margins of 23.9%, indicating effective cost management. The most significant outcome is the transformation of the balance sheet, with group cash swelling to £82.0 million and net funds reaching £70.3 million. This substantial liquidity, augmented by new, largely undrawn financing facilities, positions the company as a strategic acquirer, reinforcing its stated intention to evaluate corporate opportunities for capital deployment.

Key Decisions for Investors

• Investors should look past the headline profit figures, which are distorted by the one-off Ricardo gain, and instead focus on the modest growth in adjusted operating profit to gauge the underlying health of the core business.
• The revenue decline in the Professional Services division represents a key area to monitor, as continued weakness could offset strengths in the Systems segment and hinder organic growth prospects.
• Evaluate Science Group primarily on its capital allocation strategy and potential for value creation through M&A, given its significantly strengthened balance sheet with £70.3 million in net funds and stated intent to pursue acquisitions.
• While the company's financial position has improved, the article's note that an AI screening tool did not identify the stock as a top undervalued pick suggests that a thorough, independent valuation is warranted before committing capital.