Science Group (AIM:SAG) reported adjusted operating profit of £11.5 million for the six months to 30 June, up from £11.3 million a year earlier.
The international science, technology and engineering services group lifted its adjusted operating profit margin to 24.3%, from 19.7% in the first half of 2025.
Core revenue, which excludes pass-through defence revenue, fell to £46.4 million from £48.7 million, while total revenue dropped to £47.2 million from £57.2 million as the group continued winding down low-margin defence contracting work.
Adjusted basic earnings per share rose to 20.4p from 19.3p, helped by higher profitability and a shrinking share count from the ongoing buy-back.
Profit before tax came in at £8.1 million, broadly flat once last year's £24.0 million exceptional gain from a corporate investment disposal is stripped out.
Cash conversion held at 94%, generating £10.7 million from operations, and Group cash stood at £67.9 million at period end, down from £82.0 million a year earlier after £26.3 million was returned to shareholders over the past year via buy-backs and dividends.
The Services division, Sagentia, delivered adjusted operating profit of £7.0 million on a 24.0% margin, with UK defence work improving following the release of the government's Defence Investment Plan in July.
Submarine systems unit CMS2 posted an exceptional 38.3% margin on contract timing, while semiconductor supplier Frontier held revenue broadly flat despite rising DRAM costs.
The board anticipates 2026 buy-back spending will exceed £20.0 million and expects sequential growth in the second half, "driven principally by the Services division".
News Intelligence what this means for the company
Science Group grew adjusted operating profit and margin in H1 2026 despite intentionally shrinking low-margin defence revenue, signalling a deliberate pivot toward higher-quality earnings. Core revenue fell 4.7% to £46.4 million but adjusted operating margin expanded 460 basis points to 24.3%, driven by the Services division (Sagentia) and a submarine systems contract with exceptional timing. The group is returning capital aggressively—£26.3 million to shareholders over the past year—while maintaining a £67.9 million cash position, and management expects sequential growth in H2 2026 led by Services.
The margin expansion despite revenue headwinds and geopolitical pressure demonstrates the payoff from exiting low-margin work; profitability per pound of revenue is improving materially. However, the H1 profit gain rests partly on contract timing (CMS2's 38.3% margin) and last year's comparison benefited from a £24.0 million exceptional gain, so underlying momentum should be monitored against H2 delivery on the board's growth guidance.
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