TIDMJDG

RNS Number : 2168A

Judges Scientific PLC

22 September 2022

Judges Scientific plc

("Judges Scientific", "the Company", or "the Group")

Interim results for the six months ended 30 June 2022

Recovery continuing, large order book and largest acquisition completed

16% increase to interim dividend

Judges Scientific, the group focused on acquiring and developing companies in the scientific instrument sector, announces its unaudited interim results for the six months ended 30 June 2022.

Key financials

 
Period ended 30 June                 H1 2022      H1 2021   Change 
Revenue                             GBP46.4m     GBP43.0m     8.0% 
                                 -----------  -----------  ------- 
Adjusted* pre-tax profit             GBP9.6m      GBP8.5m    13.4% 
                                 -----------  -----------  ------- 
Adjusted* basic earnings per 
 share                                124.6p       111.0p    12.3% 
                                 -----------  -----------  ------- 
Cash generated from operations       GBP8.2m      GBP8.0m     2.5% 
                                 -----------  -----------  ------- 
Interim dividend per share             22.0p        19.0p    15.8% 
                                 -----------  -----------  ------- 
Statutory pre-tax profit             GBP3.9m      GBP6.7m  (42.3)% 
                                 -----------  -----------  ------- 
Statutory basic earnings per 
 share                                 44.4p        88.4p  (49.8)% 
                                 -----------  -----------  ------- 
 
As at:                           30 Jun 2022  31 Dec 2021 
                                 -----------  ----------- 
Adjusted* net debt (excl. IFRS                GBP1.4m net 
 16)                                GBP54.9m         cash 
                                 -----------  ----------- 
Cash balances                       GBP36.4m     GBP18.4m 
                                 -----------  ----------- 
Statutory net debt (excl. IFRS                GBP1.4m net 
 16)                                GBP22.8m         cash 
                                 -----------  ----------- 
Statutory net debt (incl. IFRS 
 16)                                GBP27.2m      GBP2.9m 
                                 -----------  ----------- 
 

Other financial highlights

   --      Organic** revenue increased 7% against H1 2021. 
   --      Organic** order intake up 4% compared with H1 2021. 
   --      Organic** order book at 21.3 weeks (H1 2021: 17.6 weeks). 

Strategic highlights

-- Completed acquisition of Geotek on 23 May 2022 for a consideration of up to GBP80 million. Largest acquisition to date and expected to significantly enhance full year earnings.

-- New GBP100 million four-year bank facility providing additional capacity to support the Group's buy and build strategy.

-- Organic business continues to recover from the impact of Covid-19 but the rate of recovery has been affected by increasing supply chain issues during the period.

Outlook

-- The external environment is still challenging, with variations between local markets and between the various scientific disciplines we serve.

   --    Resurgence of inflation, mitigated by Sterling weakness. 

-- Organic orders remain positive and to the end of August are 3% up compared to the same period in 2021.

   --    Organic order book at the end of August was 21 weeks. 

-- Strong second half anticipated from Geotek and the Board now expects that the full earn-out will be payable.

-- The Board now expects that the Group will be significantly ahead of existing market expectations for the current year.

* Adjusted earnings figures are stated before adjusting items relating to hedging of risks materialising after the end of the period, amortisation of acquired intangible assets, share based payments and acquisition-related costs. Adjusted net debt includes acquisition-related cash payables which had yet to be settled at the balance sheet date and excludes IFRS 16 debt.

** Organic denotes Group performance excluding the businesses which were not part of the Group on 1 January 2021.

Alex Hambro, Chairman of Judges Scientific, commented:

"During the period the Group generated record Organic order intake, revenues and profits in spite of increasing supply chain challenges, whilst still continuing to recover from the challenges created by Covid-19. At the end of May, the Group completed its largest acquisition to date, Geotek. A fter four months of ownership, the Board expects a strong contribution from Geotek for the second half of the financial year resulting in Adjusted Earnings per Share for the full year being significantly ahead of current market expectations.

The resilience of the Group's business model alongside the hard work by all our colleagues have once again been evident throughout the period and are reflected in the results."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Investor Presentation

Judges Scientific is hosting a webinar, available to all existing and potential shareholders, covering the interim results for the six months to 30 June 2022, on Friday 30 September at 13:00 UK time. Investors can register for the webinar here: https://bit.ly/JDG_H122_webinar

For further information please contact:

 
 Judges Scientific plc                  Tel: +44 (0) 20 3829 6970 
  David Cicurel, CEO 
  Brad Ormsby, Group FD 
 Shore Capital (Nominated Adviser       Tel: +44 (0) 20 7408 4090 
  & Joint Broker) 
  Stephane Auton 
  Iain Sexton 
 Liberum (Joint Broker)                 Tel: +44 (0) 20 3100 2222 
  Edward Mansfield 
  William Hall 
 Alma PR (Financial Public Relations)   Tel: +44 (0) 20 3405 0205 
  Sam Modlin                             Judges@almapr.co.uk 
  Justine James 
  Joe Pederzolli 
 

Chairman's statement

The Group's businesses continued their recovery from the pandemic during the first half of 2022 and generated record Organic order intake, Organic revenues, Adjusted profits and Adjusted earnings per share. Travel restrictions were gradually eased in most regions, with the exception of China which saw the return of severe lockdowns. The easing enabled us progressively to resume visits to our customers, proceed with installations and attend conferences and trade shows. Nevertheless, this performance was still delivered as supply chain issues deteriorated during the period, probably aggravated by the Chinese lockdowns and the war in Ukraine. "Business as usual" in comparison to pre-pandemic has not returned yet.

The Group's ability to deliver this record performance would not have been possible without our colleagues, all of whom have yet again worked very hard in a challenging environment. I would like to thank them for their continued dedication and commitment.

On 23 May 2022, the Group completed its largest ever acquisition with the purchase of Geotek Holding Limited and Geotek Coring Limited (together 'Geotek') for a consideration of up to GBP80 million; references to "Organic" information in this update exclude any contribution from Geotek. Geotek's impact on the Group's full year results is expected to be significant but, in view of the timing of the transaction, the impact on the first half is modest.

Order intake

Order intake across the Group benefited from the gradual return of international travel but was dampened by the resurgence of Covid-19 in China.

Organic order intake was up 4% after a 25% gain in H1 2021; this shows 8% progress compared to H1 2019 although this cannot be considered a full recovery to the pre-Covid growth trajectory. The Group saw growth in North America, up 15% (after 41% growth in H1 2021) and the Rest of the World, up 13% (after 8% improvement in H1 2021). The Rest of Europe was flat (after 34% growth in H1 last year) reflecting erratic performances across the region. China/Hong Kong, which continued to be affected by strict lockdowns over the period, receded 5% (after 2% growth in H1 2021). The UK, which had progressed 26% in H1 2021, was down 9%. Order intake still varied considerably from business to business, although less so than in H1 2021.

Revenues

Organic revenues were driven by the large order book available at the start of the year/throughout the period and by the modest H1 growth in intake, hindered by increasing supply chain difficulties and, to a lesser extent, by Covid-related absenteeism and recruitment challenges.

Group revenues for the period increased to GBP46.4 million (H1 2021: GBP43.0 million) including a 7% increase in Organic revenues. Revenues from China/Hong Kong were very strong (up 30%) in spite of the lockdowns; North America showed 21% growth and the Rest of the World 15%. The UK was down 21% and the rest of Europe was stable. The largest absolute changes were the US (up GBP1.9 million), the UK (down GBP1.5 million), China Hong Kong (up GBP1.4 million) and the Czech Republic (up GBP1.2 million). The best revenue performances were achieved in the areas which were weak in H1 2021 and vice versa, illustrating the erratic impact of Covid-19 and the ability, in our sector, to catch up over time.

The Organic order book remained robust, partially due to the operating difficulties, and reached a mid-year record of 21.3 weeks (17.6 weeks at 30 June 2021 and 23 weeks at 1 January 2022).

Profits

Adjusted operating profit improved 15% to GBP10.1 million (H1 2021: GBP8.8 million) and adjusted pre-tax profit progressed 13% to GBP9.6 million (H1 2021: GBP8.5 million).

The main driver of improved profitability was the increase in Organic revenue reflecting the operational gearing within the Group: the EBITA contribution of the Organic businesses progressed 14% versus H1 2021 in spite of a gradual increase in travel spending.

Organic Return on Total Invested Capital ("ROTIC") recovered to 29.6% for the trailing 12 months ended 30 June 2022 (30 June 2021: 25.0%). However, once Geotek is included, a sharp reduction of ROTIC must be expected.

Adjusted basic earnings per share grew 12% to 124.6p (H1 2020: 111.0p) and Adjusted diluted earnings per share progressed similarly to 123.0p from 109.5p.

The Directors continue to publish adjusted figures alongside the statutory results, prepared consistently with past reports, in order to communicate to shareholders what is, in the Directors' opinion, the true operating performance of the Group. The total adjustments of GBP5.7 million (H1 2021: GBP1.7 million) consist primarily of a GBP2.3 million charge for amortisation of acquired intangible assets arising through acquisition and GBP2.9 million of Geotek acquisition related costs. These adjusting items reduce profit before tax from GBP9.6 million to GBP3.9 million (H1 2021: GBP6.7 million) and earnings per share to 44.4p basic and 43.8p diluted (H1 2021: 88.4p basic and 87.1p diluted).

Corporate activity

On 23 May 2022, the Group completed the largest acquisition in its history. Geotek was acquired for GBP45 million plus an earn-out capped at GBP35 million plus excess cash at completion. The earn-out is based on the EBIT generated by Geotek in the calendar year 2022 and is payable to the extent such EBIT exceeds GBP6.4 million at the rate of 7 times such excess, until EBIT reaches GBP11.4 million, payable 50% in cash and 50% in new Judges shares. Geotek is a world leader in instruments conducting non-destructive testing on geological cores and in providing related services. Geotek's contribution to these interim results is modest but the acquisition is expected to be strongly earnings enhancing in the full year and the Board now expects that the full earn-out will be payable, around March 2023.

The acquisition was financed by a new GBP100 million club facility granted by Lloyds Banking Group plc, Bank of Ireland and Santander UK plc which replaced the previous GBP60 million facility which was solely with Lloyds. The new facility which is co-terminous with the previous facility and has a term of four years until 25 May 2026, consists of a GBP25 million straight-line amortising term loan, a GBP55 million committed revolving credit facility, repayable in a bullet at the end of the term, and a GBP20 million uncommitted accordion. Further details are included in Note 10.

On 27 June 2022, the Group purchased the remaining 12% of the outstanding shares in Bordeaux Acquisition Limited for a consideration of GBP2.1 million including excess cash, bringing its shareholding to 100%. GBP2 million of the consideration was settled in new Judges shares based on the prevailing share price at the date of the transaction and the balance paid in cash. Bordeaux owns 100% of Deben UK Limited and Oxford Cryosystems Limited and holds significant net cash balances. This transaction is expected to be earnings enhancing in the second half.

Cashflow and net debt

The Group once again saw good cash conversion: cash generated from operations grew to GBP8.2 million (H1 2021: GBP8.0 million) representing 81% of adjusted operating profit (H1 2021: 91%). Cash generation was still affected by increased working capital requirements from stockpiling of components to counteract supply channel difficulties and by continued payment delays arising from our inability to travel and perform installations in certain regions, particularly China.

The interim balance sheet includes cash balances of GBP36.4 million and adjusted net debt of GBP54.9 million (inclusive of the cash element of the expected Geotek earn-out), from GBP1.4 million net cash at the beginning of 2022. The overwhelming majority of investment expenditure in H1 was related to the Geotek acquisition but the Group also spent GBP4.6 million on new industrial properties and related improvements for our businesses. Ownership of factories improves our flexibility in organising them in accordance with our needs and may prove favourable in an inflationary climate.

Dividend

In accordance with the Company's policy of increasing dividends by no less than 10% per annum, the Board is declaring an interim dividend of 22p (2021: 19p), which will be paid on Friday 4 November 2022 to shareholders on the register on Friday 7 October 2022. The shares will go ex-dividend on Thursday 6 October 2022. The interim dividend is covered 5.7 times by adjusted earnings (2021: 5.5 times).

Outlook

As the world emerges from the Covid-19 engendered pandemic, and subsequently deals with the challenging external environment, our ecosystem is still unstable. Localised lockdowns remain, as well as continuing supply chain and recruitment challenges. The invasion of Ukraine has not only exacerbated some of these issues but also stimulates tensions in other regions of the world. Our scientific communities are global and cosmopolitan, and we thrive in a world at peace where commerce is conducted freely.

The need to pay the bill for Covid-19 is starting to be recognised and inflation and higher interest rates no longer appear so transient. Our Group needs to adapt to this new climate. We have recently increased our indebtedness, but we have fixed the interest rates to protect the Group from the consequences of any inflationary spiral. The market leadership of most of our businesses, their continuous search for innovation and the weakness of Sterling will alleviate the inflationary pressures we will unavoidably encounter.

Whilst the near-term trading environment does remain volatile, our sizeable order book allied with the enduring long-term drivers of our business allow us to remain confident in the Group's resilience and adaptability.

At the end of August the Organic order intake was 3% above the comparable period in 2021 and the Organic order book stood at a robust 21 weeks. The Group's Organic businesses overall are performing in line with management's expectations and, after four months of ownership, the Board expects a strong contribution from Geotek for the second half of the financial year resulting in Adjusted Earnings per Share for the full year being significantly ahead of current market expectations.

The Hon. Alexander Hambro

Chairman

22 September 2022

Condensed consolidated interim statement of comprehensive income

 
                                                                                                    Year to 
                                             Adjusting    30 June            Adjusting    30 June    31 Dec 
                                   Adjusted      items       2022  Adjusted      items       2021      2021 
                             Note    GBP000     GBP000     GBP000    GBP000     GBP000     GBP000    GBP000 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Revenue                         3    46,374          -     46,374    42,955          -     42,955    91,289 
Operating costs               3,4  (36,277)    (5,212)   (41,489)  (34,147)    (1,698)   (35,845)  (75,670) 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Operating profit/(loss)              10,097    (5,212)      4,885     8,808    (1,698)      7,110    15,619 
Interest income                           1          -          1         1          -          1         2 
Interest expense                4     (509)      (489)      (998)     (350)       (27)      (377)     (761) 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Profit/(loss) before 
 tax                                  9,589    (5,701)      3,888     8,459    (1,725)      6,734    14,860 
Taxation (charge)/credit            (1,509)        592      (917)   (1,318)        258    (1,060)   (1,956) 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Profit/(loss) for 
 the period                           8,080    (5,109)      2,971     7,141    (1,467)      5,674    12,904 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Attributable to: 
Owners of the parent                  7,883    (5,074)      2,809     7,001    (1,431)      5,570    12,682 
Non-controlling 
 interests                              197       (35)        162       140       (36)        104       222 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Profit/(loss) for 
 the period                           8,080    (5,109)      2,971     7,141    (1,467)      5,674    12,904 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Other comprehensive 
 income 
Items that will 
 not be reclassified 
 subsequently to 
 profit or loss 
Retirement benefits 
 actuarial gain                                             1,374                           1,196     1,445 
Deferred tax on 
 retirement benefits 
 actuarial gain                                             (344)                           (258)     (206) 
Items that may be 
 reclassified subsequently 
 to profit or loss 
Exchange gain/(loss) 
 on translation of 
 foreign subsidiaries                                         211                            (21)        22 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Other comprehensive 
 income for the period, 
 net of tax                                                 1,241                             917     1,261 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Total comprehensive 
 income for the period                                      4,212                           6,591    14,165 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
Attributable to: 
Owners of the parent                                        4,050                           6,487    13,943 
Non-controlling 
 interests                                                    162                             104       222 
---------------------------  ----  --------  ---------  ---------  --------  ---------  ---------  -------- 
 
 
                      Pence  Pence   Pence  Pence  Pence 
-------------------   -----  -----  ------  -----  ----- 
Earnings per share 
 - adjusted 
Basic                5124.6          111.0         238.1 
Diluted              5123.0          109.5         234.9 
-------------------   -----  -----  ------  -----  ----- 
Earnings per share 
 - total 
Basic                5        44.4           88.4  201.0 
Diluted              5        43.8           87.1  198.2 
-------------------   -----  -----  ------  -----  ----- 
 

Condensed consolidated interim balance sheet

 
                                            30 June   30 June  31 December 
                                               2022      2021         2021 
                                    Note     GBP000    GBP000       GBP000 
----------------------------------  ----  ---------  --------  ----------- 
ASSETS 
Non-current assets 
Goodwill                               6     50,452    18,713       18,713 
Other intangible assets                7     49,655     5,963        5,056 
Property, plant and equipment                15,315     6,702        8,254 
Right-of-use leased assets                    4,299     4,646        4,186 
Deferred tax assets                           4,131     1,899        3,081 
----------------------------------  ----  ---------  --------  ----------- 
                                            123,852    37,923       39,290 
----------------------------------  ----  ---------  --------  ----------- 
Current assets 
Inventories                                  21,936    13,175       14,133 
Trade and other receivables                  20,116    16,312       17,146 
Cash and cash equivalents                    36,386    17,612       18,408 
----------------------------------  ----  ---------  --------  ----------- 
                                             78,438    47,099       49,687 
----------------------------------  ----  ---------  --------  ----------- 
Total assets                                202,290    85,022       88,977 
----------------------------------  ----  ---------  --------  ----------- 
LIABILITIES 
Current liabilities 
Trade and other payables                   (28,439)  (16,774)     (19,373) 
Payables relating to acquisitions      9   (48,204)         -            - 
Borrowings                            11    (6,679)   (4,657)      (4,657) 
Right-of-use lease liabilities              (1,037)     (938)        (887) 
Current tax liabilities                     (2,016)   (2,216)      (1,726) 
----------------------------------  ----  ---------  --------  ----------- 
                                           (86,375)  (24,585)     (26,643) 
----------------------------------  ----  ---------  --------  ----------- 
Non-current liabilities 
Borrowings                            11   (52,518)  (14,679)     (12,351) 
Right-of-use lease liabilities              (3,395)   (3,836)      (3,420) 
Deferred tax liabilities                   (12,399)   (1,767)      (1,845) 
Retirement benefit obligations        12         35   (1,962)      (1,324) 
----------------------------------  ----  ---------  --------  ----------- 
                                           (68,277)  (22,244)     (18,940) 
----------------------------------  ----  ---------  --------  ----------- 
Total liabilities                         (154,652)  (46,829)     (45,583) 
----------------------------------  ----  ---------  --------  ----------- 
Net assets                                   47,638    38,193       43,394 
----------------------------------  ----  ---------  --------  ----------- 
EQUITY 
Share capital                          8        318       316          316 
Share premium                                18,954    16,562       16,667 
Other reserves                                2,210     1,903        1,999 
Retained earnings                            26,112    18,912       23,794 
----------------------------------  ----  ---------  --------  ----------- 
Equity attributable to owners 
 of the parent                               47,594    37,693       42,776 
Non-controlling interests                        44       500          618 
----------------------------------  ----  ---------  --------  ----------- 
Total equity                                 47,638    38,193       43,394 
----------------------------------  ----  ---------  --------  ----------- 
 

Condensed consolidated interim statement of changes in equity

 
                                                                                      Total 
                                                                               attributable          Non- 
                                       Share     Share      Other   Retained      to owners   controlling    Total 
                                     capital   premium   reserves   earnings      of parent     interests   equity 
                                      GBP000    GBP000     GBP000     GBP000         GBP000        GBP000   GBP000 
 ---------------------------------  --------  --------  ---------  ---------  -------------  ------------  ------- 
 At 1 January 2022                       316    16,667      1,999     23,794         42,776           618   43,394 
 ---------------------------------  --------  --------  ---------  ---------  -------------  ------------  ------- 
 Change in non -- controlling 
  interest                                 -         -          -    (1,366)        (1,366)         (736)  (2,102) 
 Issue of share capital                    2     2,287          -          -          2,289             -    2,289 
 Purchase of own shares for 
  Company 
  reward scheme                            -         -          -       (85)           (85)             -     (85) 
 Deferred tax on share-based 
  payments                                 -         -          -      (404)          (404)             -    (404) 
 Share-based payments                      -         -          -        334            334             -      334 
 ---------------------------------  --------  --------  ---------  ---------  -------------  ------------  ------- 
 Transactions with owners                  2     2,287          -    (1,521)            768         (736)       32 
 ---------------------------------  --------  --------  ---------  ---------  -------------  ------------  ------- 
 Profit for the period                     -         -          -      2,809          2,809           162    2,971 
 Retirement benefit actuarial gain         -         -          -      1,030          1,030             -    1,030 
 Foreign exchange differences              -         -        211          -            211             -      211 
 ---------------------------------  --------  --------  ---------  ---------  -------------  ------------  ------- 
 Total comprehensive income for 
  the 
  period                                   -         -        211      3,839          4,050           162    4,212 
 ---------------------------------  --------  --------  ---------  ---------  -------------  ------------  ------- 
 At 30 June 2022                         318    18,954      2,210     26,112         47,594            44   47,638 
 ---------------------------------  --------  --------  ---------  ---------  -------------  ------------  ------- 
 
 
 At 1 January 2021                           315  16,429  1,977   13,469   32,190    858   33,048 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Change in non -- controlling interest         -       -      -  (1,371)  (1,371)  (462)  (1,833) 
 Issue of share capital                        1     133      -        -      134      -      134 
 Purchase of own shares for Company reward 
  scheme                                       -       -   (53)        -     (53)      -     (53) 
 Share-based payments                          -       -      -      306      306      -      306 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Transactions with owners                      1     133   (53)  (1,065)    (984)  (462)  (1,446) 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Profit for the period                         -       -      -    5,570    5,570    104    5,674 
 Retirement benefit actuarial gain             -       -      -      938      938      -      938 
 Foreign exchange differences                  -       -   (21)        -     (21)      -     (21) 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Total comprehensive income for the period     -       -   (21)    6,508    6,487    104    6,591 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 At 30 June 2021                             316  16,562  1,903   18,912   37,693    500   38,193 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 
 
 At 1 January 2021                           315  16,429  1,977   13,469   32,190    858   33,048 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Dividends                                     -       -      -  (3,630)  (3,630)      -  (3,630) 
 Change in non -- controlling interest         -       -      -  (1,371)  (1,371)  (462)  (1,833) 
 Issue of share capital                        1     238      -        -      239      -      239 
 Purchase of own shares for Company reward 
  scheme                                       -       -      -     (53)     (53)      -     (53) 
 Deferred tax on share-based payments          -       -      -      823      823      -      823 
 Share-based payments                          -       -      -      635      635      -      635 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Transactions with owners                      1     238      -  (3,596)  (3,357)  (462)  (3,819) 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Profit for the year                           -       -      -   12,682   12,682    222   12,904 
 Retirement benefit actuarial gain             -       -      -    1,239    1,239      -    1,239 
 Foreign exchange differences                  -       -     22        -       22      -       22 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 Total comprehensive income for the year       -       -     22   13,921   13,943    222   14,165 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 At 31 December 2021                         316  16,667  1,999   23,794   42,776    618   43,394 
 ------------------------------------------  ---  ------  -----  -------  -------  -----  ------- 
 

Condensed consolidated interim cashflow statement

 
                                                                 Six months  Six months          Year 
                                                                         to          to            to 
                                                                    30 June     30 June   31 December 
                                                                       2022        2021          2021 
                                                                     GBP000      GBP000        GBP000 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Cashflows from operating activities 
 Profit after tax                                                     2,971       5,674        12,904 
 Adjustments for: 
 Financial instruments measured at fair value: hedging 
  contracts                                                           (441)        (34)         (190) 
 Share-based payments                                                   334         306           635 
 Depreciation of property, plant and equipment                          537         512         1,039 
 Depreciation of right-of-use leased assets                             523         510         1,066 
 Amortisation of acquired intangible assets                           2,337       1,355         2,638 
 Amortisation of internally generated intangible assets                  42           -            11 
 Profit on disposal of property, plant and equipment                   (22)        (29)          (37) 
 Interest income                                                        (1)         (1)           (2) 
 Interest expense                                                       415         245           516 
 Interest payable on right-of-use lease liabilities                      94         105           197 
 Unwinding of discount on fair value of deferred consideration          474           -             - 
 Retirement benefit obligation net interest cost                         15          27            48 
 Contributions to defined benefit plans                                   -       (164)         (574) 
 Tax recognised in the Consolidated Statement of Comprehensive 
  Income                                                                917       1,060         1,956 
 Increase in inventories                                            (3,714)       (590)       (1,548) 
 Decrease/(increase) in trade and other receivables                     163     (1,972)       (2,806) 
 Increase in trade and other payables                                 3,544         983         3,726 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Cash generated from operations                                       8,188       7,987        19,579 
 Tax paid                                                             (707)       (565)       (2,180) 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Net cash from operating activities                                   7,481       7,422        17,399 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Cashflows from investing activities 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Paid on acquisition of subsidiaries                               (45,000)           -             - 
 Gross cash inherited on acquisition                                 19,606           -             - 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Acquisition of subsidiaries, net of cash acquired                 (25,394)           -             - 
 Purchase of property, plant and equipment                          (5,086)       (544)       (2,652) 
 Capitalised development costs                                        (528)       (409)         (796) 
 Proceeds on disposal of property, plant and equipment                   38          36            74 
 Interest received                                                        1           1             2 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Net cash used in investing activities                             (30,969)       (916)       (3,372) 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Cashflows from financing activities 
 Proceeds from issue of share capital                                   289         134           239 
 Purchase of own shares for Company reward scheme                      (85)        (53)          (53) 
 Finance costs paid                                                   (415)       (245)         (516) 
 Repayments of borrowings*                                          (2,941)     (1,879)       (4,207) 
 Repayments of right-of-use lease liabilities                         (601)       (520)       (1,164) 
 Proceeds from bank loans*                                           45,130           -             - 
 Equity dividends paid                                                    -           -       (3,630) 
 Paid on acquisition of non-controlling interest in 
  subsidiary                                                          (102)     (1,833)       (1,833) 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Net cash from/(used in) financing activities                        41,275     (4,396)      (11,164) 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Net change in cash and cash equivalents                             17,787       2,110         2,863 
 Cash and cash equivalents at the start of the period                18,408      15,523        15,523 
 Exchange movements                                                     191        (21)            22 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 Cash and cash equivalents at the end of the period                  36,386      17,612        18,408 
 --------------------------------------------------------------  ----------  ----------  ------------ 
 

* On 23 May 2022, GBP15.2 million of outstanding loans were repaid and GBP60.3 million was simultaneously reborrowed as the Group renewed its banking facilities (see Notes 10 and 11). On 25 May 2021, GBP19.0 million of outstanding loans were repaid and simultaneously reborrowed as the Group renewed its banking facilities.

Notes to the interim report

1. General information and basis of preparation

The Judges Scientific plc Group's principal activities comprise the design, manufacture and sale of scientific instruments. The subsidiaries are grouped into two segments: Materials Sciences and Vacuum. The recent acquisition of Geotek has been included in the Material Sciences segment.

The financial information set out in this Interim Report for the six months ended 30 June 2022 and the comparative figures for the six months ended 30 June 2021 are unaudited. The Interim Report has been prepared in accordance with IAS 34 'Interim Financial Reporting'. The Interim Report does not contain all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2021, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 (IFRS).

The financial information for the year ended 31 December 2021 set out in this Interim Report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2021 have been filed with the Registrar of Companies. The Auditor's Report in respect of those financial statements was unqualified and did not contain statements under section 498 of the Companies Act 2006.

Judges Scientific plc is the Group's ultimate parent company. The Company is a public limited company incorporated and domiciled in the United Kingdom. Its registered office and principal place of business is 52c Borough High Street, London SE1 1XN and the Company's shares are quoted on the Alternative Investment Market. The Interim Report is presented in Sterling, which is the functional currency of the parent company. The Interim Report has been approved for issue by the Board of Directors on 22 September 2022.

Going concern

The consolidated financial statements have been prepared on a going concern basis. The Group ended the first half of 2022 with adjusted net debt of GBP54.9 million compared to adjusted net cash of GBP1.4 million at 31 December 2021. The Group refinanced its borrowing facilities in May 2022 for a four-year term providing the Group with certainty over long-term liquidity; as part of the financing, the Group increased borrowings by GBP45.1 million, in order to finance the acquisition of Geotek, and there are additional cash liabilities in respect of the acquisition of GBP32.1 million (see notes 9 to 11). Aside from the increase in borrowing and amounts payable in respect of the acquisition, the Group's cash position improved in the period as a result of consistent cash generation arising from strong performance of the Group's principal operating companies, supported by growth in Organic order intake and a large forward order book. The improvement in cash is after outlays for paying our fair share of tax (GBP0.7 million) and ongoing investment into capital expenditure (GBP5.1 million).

The Directors have considered the ongoing impact of the events in Ukraine and the Covid-19 pandemic. The Group remains in a strong financial position, with high cash balances, high cash generation and a solid future order book enabling it to face the challenge of the continued uncertain global economic environment. The Directors have planned for reasonably foreseeable worsening scenarios including a repetition of the same level of reduction in orders in 2022 as happened in 2020 (at the start of Covid-19) which would not cause any significant challenges to the Group's continued existence.

The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis in preparing the Interim Report.

2. Significant accounting policies

The Interim Report has been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2021, except for the taxation policy where, for the purposes of the interim results, the tax charge on adjusted business performance is calculated by reference to the estimated effective rate for the full year.

3. Segmental analysis

 
                                  Materials               Head 
For the period ended 30            Sciences    Vacuum   office     Total 
 June 2022                  Note     GBP000    GBP000   GBP000    GBP000 
--------------------------  ----  ---------  --------  -------  -------- 
Revenue                              21,862    24,512        -    46,374 
Operating costs                    (17,206)  (17,545)  (1,526)  (36,277) 
--------------------------  ----  ---------  --------  -------  -------- 
Adjusted operating profit             4,656     6,967  (1,526)    10,097 
Adjusting items                4                                 (5,212) 
--------------------------  ----  ---------  --------  -------  -------- 
Operating profit                                                   4,885 
Net interest expense                                               (997) 
--------------------------  ----  ---------  --------  -------  -------- 
Profit before tax                                                  3,888 
Income tax charge                                                  (917) 
--------------------------  ----  ---------  --------  -------  -------- 
Profit for the period                                              2,971 
--------------------------  ----  ---------  --------  -------  -------- 
 
 
                                  Materials               Head 
For the period ended 30            Sciences    Vacuum   office     Total 
 June 2021                  Note     GBP000    GBP000   GBP000    GBP000 
--------------------------  ----  ---------  --------  -------  -------- 
Revenue                              19,019    23,936        -    42,955 
Operating costs                    (15,926)  (16,908)  (1,313)  (34,147) 
--------------------------  ----  ---------  --------  -------  -------- 
Adjusted operating profit             3,093     7,028  (1,313)     8,808 
Adjusting items                4                                 (1,698) 
--------------------------  ----  ---------  --------  -------  -------- 
Operating profit                                                   7,110 
Net interest expense                                               (376) 
--------------------------  ----  ---------  --------  -------  -------- 
Profit before tax                                                  6,734 
Income tax charge                                                (1,060) 
--------------------------  ----  ---------  --------  -------  -------- 
Profit for the period                                              5,674 
--------------------------  ----  ---------  --------  -------  -------- 
 
 
                                       Materials               Head 
For the year ended 31 December          Sciences    Vacuum   office     Total 
 2021                            Note     GBP000    GBP000   GBP000    GBP000 
-------------------------------  ----  ---------  --------  -------  -------- 
Revenue                                   40,716    50,573        -    91,289 
Operating costs                         (33,251)  (35,531)  (3,730)  (72,512) 
-------------------------------  ----  ---------  --------  -------  -------- 
Adjusted operating profit                  7,465    15,042  (3,730)    18,777 
Adjusting items                     4                                 (3,158) 
-------------------------------  ----  ---------  --------  -------  -------- 
Operating profit                                                       15,619 
Net interest expense                                                    (759) 
-------------------------------  ----  ---------  --------  -------  -------- 
Profit before tax                                                      14,860 
Income tax charge                                                     (2,061) 
-------------------------------  ----  ---------  --------  -------  -------- 
Profit for the year                                                    12,799 
-------------------------------  ----  ---------  --------  -------  -------- 
 

Head office items relate to the Group's head office costs.

Segment assets and liabilities

 
                                                  Materials                 Head 
                                                   Sciences    Vacuum     office      Total 
At 30 June 2022                                      GBP000    GBP000     GBP000     GBP000 
------------------------------------------------  ---------  --------  ---------  --------- 
Assets                                               62,459    37,786    102,045    202,290 
Liabilities                                        (22,105)  (12,951)  (119,596)  (154,652) 
------------------------------------------------  ---------  --------  ---------  --------- 
Net assets                                           40,354    24,835   (17,551)     47,638 
------------------------------------------------  ---------  --------  ---------  --------- 
Capital expenditure                                     130     4,946         10      5,086 
Depreciation of property, plant and equipment           213       293         31        537 
Depreciation of right-of-use leased assets              289       205         29        523 
Amortisation of acquired intangible assets            1,666       671          -      2,337 
Amortisation of internally generated intangible 
 assets                                                  13        29          -         42 
------------------------------------------------  ---------  --------  ---------  --------- 
 
 
                                                Materials                Head 
                                                 Sciences    Vacuum    office     Total 
At 30 June 2021                                    GBP000    GBP000    GBP000    GBP000 
----------------------------------------------  ---------  --------  --------  -------- 
Assets                                             25,374    34,492    25,156    85,022 
Liabilities                                      (12,390)  (11,724)  (22,715)  (46,829) 
----------------------------------------------  ---------  --------  --------  -------- 
Net assets                                         12,984    22,768     2,441    38,193 
----------------------------------------------  ---------  --------  --------  -------- 
Capital expenditure                                   198       343         3       544 
Depreciation of property, plant and equipment         177       309        26       512 
Depreciation of right-of-use leased assets            261       219        30       510 
Amortisation of acquired intangible assets            530       825         -     1,355 
----------------------------------------------  ---------  --------  --------  -------- 
 
 
                                                  Materials                Head 
                                                   Sciences    Vacuum    office     Total 
At 31 December 2021                                  GBP000    GBP000    GBP000    GBP000 
------------------------------------------------  ---------  --------  --------  -------- 
Assets                                               27,087    35,671    26,219    88,977 
Liabilities                                        (13,423)  (11,873)  (20,287)  (45,583) 
------------------------------------------------  ---------  --------  --------  -------- 
Net assets                                           13,664    23,798     5,932    43,394 
------------------------------------------------  ---------  --------  --------  -------- 
Capital expenditure                                     384     2,253        15     2,652 
Depreciation of property, plant and equipment           362       624        53     1,039 
Depreciation of right-of-use leased assets              536       474        56     1,066 
Amortisation of acquired intangible assets            1,070     1,568         -     2,638 
Amortisation of internally generated intangible 
 assets                                                   4         7         -        11 
------------------------------------------------  ---------  --------  --------  -------- 
 

Head office items are borrowings, intangible assets and goodwill arising on acquisition, deferred tax, defined benefit obligations and parent company net assets.

 
                      Six months  Six months 
                              to          to       Year to 
                         30 June     30 June   31 December 
                            2022        2021          2021 
Geographic analysis       GBP000      GBP000        GBP000 
--------------------  ----------  ----------  ------------ 
UK (domicile)              5,914       7,743        14,776 
Rest of Europe            14,515      14,354        29,488 
North America             10,219       8,382        20,034 
China/Hong Kong            6,155       4,720        11,103 
Rest of the World          9,571       7,756        15,888 
--------------------  ----------  ----------  ------------ 
Revenue                   46,374      42,955        91,289 
--------------------  ----------  ----------  ------------ 
 

4. Adjusting items

 
                                                                Six months  Six months          Year 
                                                                        to          to            to 
                                                                   30 June     30 June   31 December 
                                                                      2022        2021          2021 
                                                                    GBP000      GBP000        GBP000 
--------------------------------------------------------------  ----------  ----------  ------------ 
Amortisation of acquired intangible assets                           2,337       1,355         2,638 
Financial instruments measured at fair value: hedging 
 contracts                                                           (441)        (34)         (190) 
Share-based payments                                                   334         306           635 
Employment taxes arising from share-based payments                      60          39            90 
Acquisition costs                                                    2,922          32          (15) 
--------------------------------------------------------------  ----------  ----------  ------------ 
Total adjusting items within operating profit                        5,212       1,698         3,158 
Unwinding of discount on fair value of deferred consideration          474           -             - 
Retirement benefits obligation net interest cost                        15          27            48 
--------------------------------------------------------------  ----------  ----------  ------------ 
Total adjusting items                                                5,701       1,725         3,206 
Taxation                                                             (592)       (258)         (797) 
--------------------------------------------------------------  ----------  ----------  ------------ 
Total adjusting items net of tax                                     5,109       1,467         2,409 
--------------------------------------------------------------  ----------  ----------  ------------ 
Attributable to: 
Owners of the parent                                                 5,074       1,431         2,345 
Non-controlling interests                                               35          36            64 
--------------------------------------------------------------  ----------  ----------  ------------ 
                                                                     5,109       1,467         2,409 
--------------------------------------------------------------  ----------  ----------  ------------ 
 

5. Earnings per share

 
                                           Six months  Six months          Year 
                                                   to          to            to 
                                              30 June     30 June   31 December 
                                                 2022        2021          2021 
                                     Note      GBP000      GBP000        GBP000 
-----------------------------------  ----  ----------  ----------  ------------ 
Profit for the period attributable 
 to owners of the parent 
Adjusted profit                                 7,883       7,001        15,027 
Adjusting items                         4     (5,074)     (1,431)       (2,345) 
-----------------------------------  ----  ----------  ----------  ------------ 
Profit for the period                           2,809       5,570        12,682 
-----------------------------------  ----  ----------  ----------  ------------ 
 
 
                                Pence  Pence  Pence 
------------------------------  -----  -----  ----- 
Earnings per share - adjusted 
Basic                           124.6  111.0  238.1 
Diluted                         123.0  109.5  234.9 
Earnings per share - total 
Basic                            44.4   88.4  201.0 
Diluted                          43.8   87.1  198.2 
 
 
                                         Number     Number     Number 
-----------------------------------   ---------  ---------  --------- 
Issued Ordinary shares at start 
 of the period                       76,318,415  6,299,163  6,299,163 
Movement in Ordinary shares during 
 the period                          7   36,002     12,676     19,252 
-----------------------------------   ---------  ---------  --------- 
Issued Ordinary shares at end 
 of the period                       76,354,417  6,311,839  6,318,415 
-----------------------------------   ---------  ---------  --------- 
Weighted average number of shares 
 in issue                             6,325,433  6,306,177  6,310,608 
Dilutive effect of share options         85,251     90,467     87,786 
-----------------------------------   ---------  ---------  --------- 
Weighted average shares in issue 
 on a diluted basis                   6,410,684  6,396,644  6,398,394 
-----------------------------------   ---------  ---------  --------- 
 

Adjusted basic earnings per share is calculated on the adjusted profit, which excludes any adjusting items, attributable to the Company's shareholders divided by the weighted average number of shares in issue during the period.

Adjusted diluted earnings per share is calculated on the adjusted basic earnings per share, adjusted to allow for the issue of Ordinary shares on the assumed conversion of all dilutive share options and any other dilutive potential Ordinary shares. The calculation is based on the treasury method prescribed in IAS 33. This calculates the theoretical number of shares that could be purchased at the average middle market price in the period out of the proceeds of the notional exercise of outstanding options. The difference between this theoretical number and the actual number of shares under option is deemed liable to be issued at nil value and represents the dilution.

Total earnings per share is calculated as above whilst substituting total profit for adjusted profit.

6. Goodwill

The following tables show the additions to goodwill:

 
                                     Total 
                                    GBP000 
--------------------------------   ------- 
Carrying amount at 
 1 January 2022                     18,713 
Acquisitions (see note 9)           31,739 
---------------------------------  ------- 
Carrying amount at 30 June 2022     50,452 
---------------------------------  ------- 
 
 
                                  Total 
                                 GBP000 
-----------------------------   ------- 
Carrying amount at 1 January 
 and 30 June 2021                18,713 
------------------------------  ------- 
 
 
                                      Total 
                                     GBP000 
---------------------------------   ------- 
Carrying amount at 1 January and 
 31 December 2021                    18,713 
----------------------------------  ------- 
 

7. Other intangible assets

The following tables show the additions to, and amortisation of, intangible assets:

 
                                                                                    Acquired 
                                  Internally                              Acquired     brand 
                                   generated       Acquired                  sales       and        Acquired 
                                 development   distribution     Acquired     order    domain        customer 
                                       costs     agreements   technology   backlog     names   relationships    Total 
                          Note        GBP000         GBP000       GBP000    GBP000    GBP000          GBP000   GBP000 
-----------------------  -----  ------------  -------------  -----------  --------  --------  --------------  ------- 
Carrying amount at 
 1 January 2022                          785             92        2,006         -       918           1,255    5,056 
Acquisitions (see note 
 9)                                        -              -       22,750     5,400     1,800          16,500   46,450 
Additions                                528              -            -         -         -               -      528 
Amortisation                            (42)           (50)        (796)     (300)     (286)           (905)  (2,379) 
------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
Carrying amount at 30 
 June 2022                             1,271             42       23,960     5,100     2,432          16,850   49,655 
------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
 
 
                                                                                     Acquired 
                                   Internally                              Acquired     brand 
                                    generated       Acquired                  sales       and        Acquired 
                                  development   distribution     Acquired     order    domain        customer 
                                        costs     agreements   technology   backlog     names   relationships    Total 
                                       GBP000         GBP000       GBP000    GBP000    GBP000          GBP000   GBP000 
-------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
Carrying amount at 
 1 January 2021                             -            192        2,970        33     1,566           2,148    6,909 
Additions                                 409              -            -         -         -               -      409 
Amortisation                                -           (50)        (519)      (33)     (348)           (405)  (1,355) 
-------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
Carrying amount at 30 June 2021           409            142        2,451         -     1,218           1,743    5,963 
-------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
 
 
                                                                                     Acquired 
                                   Internally                              Acquired     brand 
                                    generated       Acquired                  sales       and        Acquired 
                                  development   distribution     Acquired     order    domain        customer 
                                        costs     agreements   technology   backlog     names   relationships    Total 
                                       GBP000         GBP000       GBP000    GBP000    GBP000          GBP000   GBP000 
-------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
Carrying amount at 
 1 January 2021                             -            192        2,970        33     1,566           2,148    6,909 
Additions                                 796              -            -         -         -               -      796 
Amortisation                             (11)          (100)        (964)      (33)     (648)           (893)  (2,649) 
-------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
Carrying amount at 31 December 
 2021                                     785             92        2,006         -       918           1,255    5,056 
-------------------------------  ------------  -------------  -----------  --------  --------  --------------  ------- 
 

8. Share capital

Movements in the Group's Ordinary shares in issue are summarised as follows:

 
                                                                     2022     2021 
Ordinary shares of 5p each                                         GBP000   GBP000 
----------------------------------------------------------------  -------  ------- 
Allotted, called up and fully paid - Ordinary shares of 
 5p each 
1 January: 6,318,415 shares (2021: 6,299,163 shares)                  316      315 
Exercise of share options: 3,876 shares (2021: 12,676 shares)           -        1 
Issue of shares as settlement of acquisition costs: 2,929 
 shares (2021: nil shares)                                              -        - 
Issue of shares as consideration for shareholding in subsidiary 
 company: 29,197 shares (2021: nil shares)                              2        - 
----------------------------------------------------------------  -------  ------- 
30 June: 6,354,417 shares (2021: 6,311,839 shares)                    318      316 
----------------------------------------------------------------  -------  ------- 
 

Allotments of Ordinary shares in the first six months of 2022 were made to satisfy the exercise of 3,876 share options in aggregate on 5 occasions during the period when the share price was within the range of 7500p to 8360p (2021: exercise of 12,676 share options when the share price was within the range of 5800p to 6408p).

9. Acquisitions

Acquisition of Geotek Holding Limited and Geotek Coring Limited

On 23 May 2022, Judges Scientific acquired 100% of the entire issued share capital of Geotek Holding Limited and Geotek Coring Limited (together "Geotek" or the "Acquisition"), a world leading developer and manufacturer of instruments used to measure and log various characteristics of geological cores and a supplier of related services.

The purchase price of Geotek consists of:

   --          The initial consideration, paid in cash at completion, of GBP45 million. 

-- Contingent consideration of up to a maximum GBP35 million ("Earn-out") to be satisfied half in cash and half in new Judges ordinary shares to be issued at a price of GBP76.80 per new ordinary share, Judges' prevailing share price at the time of signing heads of terms with Geotek's vendors.

-- The Earn-out starts to become payable on achievement of a minimum adjusted EBIT of GBP6.4 million for the calendar year 2022 increasing pro rata on a 7:1 ratio until it reaches a cap when an adjusted EBIT of GBP11.4 million is achieved.

-- An additional payment for excess cash (surplus working capital) at completion over and above the ongoing requirements of the business and will be covered by the cash inherited at completion.

The summary provisional fair value of the cost of this acquisition includes the components stated below:

 
Consideration                                                        GBP000 
------------------------------------------------------------------  ------- 
Initial cash consideration                                           45,000 
Earn-out                                                             31,706 
------------------------------------------------------------------  ------- 
                                                                     76,706 
------------------------------------------------------------------  ------- 
Gross cash inherited on acquisition                                  19,606 
Cash retained in the business                                       (3,582) 
------------------------------------------------------------------  ------- 
Payment in respect of surplus working capital                        16,024 
------------------------------------------------------------------  ------- 
Total consideration                                                  92,730 
------------------------------------------------------------------  ------- 
Acquisition-related transaction costs charged to the Consolidated 
 Statement of Comprehensive Income                                    2,922 
------------------------------------------------------------------  ------- 
 

The maximum Earn-out is expected to be paid, however as the amount is likely to fall due around March 2023, it has been discounted to GBP31.7 million. The payment in respect of surplus working capital is a provisional figure and will be agreed and settled in October 2022.

The estimated total fair value of the future liabilities relating to the Geotek acquisition as at 23 May and 30 June 2022 consists of the following:

 
                                                          23 May  Non-cash  30 June 
                                                            2022      item     2022 
                                                          GBP000    GBP000   GBP000 
-------------------------------------------------------  -------  --------  ------- 
Payable in respect of surplus working capital             16,024         -   16,024 
 
50% of earn-out to be satisfied in cash                   15,853       237   16,090 
-------------------------------------------------------  -------  --------  ------- 
Total payable in cash                                     31,877       237   32,114 
-------------------------------------------------------  -------  --------  ------- 
50% of earn-out to be satisfied in new ordinary shares    15,853       237   16,090 
-------------------------------------------------------  -------  --------  ------- 
Total payables relating to acquisitions                   47,730       474   48,204 
-------------------------------------------------------  -------  --------  ------- 
 

The non-cash item is the unwinding of the discount on the Earn-out consideration.

The summary provisional fair values recognised for the assets and liabilities acquired are as follows:

 
                                                       Accounting          Fair 
                                                           policy         value      Fair 
                                          Book value   alignments   adjustments     value 
                                              GBP000       GBP000        GBP000    GBP000 
----------------------------------------  ----------  -----------  ------------  -------- 
Intangible assets                                  -            -        46,450    46,450 
Property, plant and equipment                  2,546            -             -     2,546 
Right-of-use leased assets                         -          652             -       652 
Deferred tax assets                            1,094          480           308     1,882 
Current tax recoverable                          375            -             -       375 
Inventories                                    5,111            -       (1,022)     4,089 
Trade and other receivables                    3,161          112         (140)     3,133 
Cash and cash equivalents                     19,606            -             -    19,606 
----------------------------------------  ----------  -----------  ------------  -------- 
Total assets                                  31,893        1,244        45,596    78,733 
----------------------------------------  ----------  -----------  ------------  -------- 
Deferred tax liabilities                        (85)            -      (10,912)  (10,997) 
Trade payables                               (3,335)      (2,639)          (70)   (6,044) 
Right-of-use lease liabilities                     -        (652)             -     (652) 
Current tax liability                           (49)            -             -      (49) 
----------------------------------------  ----------  -----------  ------------  -------- 
Total liabilities                            (3,469)      (3,291)      (10,982)  (17,742) 
----------------------------------------  ----------  -----------  ------------  -------- 
Net identifiable assets and liabilities       28,424      (2,047)        34,614    60,991 
----------------------------------------  ----------  -----------  ------------  -------- 
Total consideration                                                                92,730 
----------------------------------------  ----------  -----------  ------------  -------- 
Goodwill recognised                                                                31,739 
----------------------------------------  ----------  -----------  ------------  -------- 
 

The intangible assets recognised reflect recognition of acquired customer relationships, the value of the acquired future committed order book, acquired technology together with brand names. A significant amount of the value of the acquired business is attributable to its workforce and sales knowhow and contributes to the goodwill recognised upon acquisition. This goodwill has been allocated to the Materials Sciences segment.

The majority of the deferred tax liabilities recognised represent the tax effect which will result from the amortisation of the intangible assets, estimated using the tax rate substantively enacted at the balance sheet date. Additional fair value adjustments include stock, doubtful debt, and warranty provisions together with the related deferred tax. Adjustments to recognition of revenue for certain contracts, and recognition of right-of-use assets and liabilities were made to align with Group accounting policies.

Increased shareholding in Bordeaux Acquisition Limited

On 27 June 2022, Judges acquired 12.0% of the shares in Bordeaux Acquisition Limited ("Bordeaux") for a consideration of GBP2.1 million, increasing its shareholding from 88% to 100%. GBP2 million of the consideration was settled via the issue of 29,197 new Judges ordinary shares issued at a price of GBP68.50 per share, equal to the mid-market price at close of business on Friday 24 June 2022, with the balance paid in cash.

10. Banking arrangements

On 23 May 2022, the Group entered into a new GBP100 million multi-bank facility ("Facility") with Lloyds Banking Group plc, Santander UK plc and Bank of Ireland (the "Banks") which replaced its existing unilateral banking arrangements with Lloyds Bank, which were for an aggregate amount of GBP60 million. The initial consideration for the acquisition of Geotek was financed from this Facility.

The Facility is for an aggregate GBP100 million consisting of a GBP25 million term loan ("Term Loan"), a committed GBP55 million revolving credit facility ("RCF") plus a GBP20 million uncommitted accordion facility, which can be drawn with the agreement of the Banks. The Facility replaced the Group's previous facilities of which GBP15.2 million was outstanding at the time of the acquisition of Geotek. The life of this new Facility is co-terminous with the previous facility and therefore has a term of 4 years until 25 May 2026 ("Borrowing Term").

The Term Loan amortises on a straight line basis over the Borrowing Term by quarterly instalments. The RCF is repayable in a bullet at the end of the Borrowing Term.

The banking covenants have been adjusted from the previous banking arrangements, namely:

-- Gearing no greater than 3.0 times Adjusted EBITDA (an increase from 2.5 times in the previous arrangement);

   --      Interest Cover no less than 3 times; and 
   --      Minimum EBITDA covenant within the previous facilities is no longer required. 

Interest rates are consistent with the previous facilities, save for an additional rate between 2.5 and 3.0 times gearing.

The existing lending facilities via Bordeaux were unchanged. Subsequent to Judges' purchase of the remaining 12% of Bordeaux (see note 9) on 27 June 2022, Bordeaux repaid in full its outstanding loan of GBP0.4 million on 28 July 2022.

11. Changes in net (debt)/cash

Changes in net debt for the six months ended 30 June 2022 were as follows:

 
                                                    1 January            Non-cash   30 June 
                                                         2022  Cashflow     items      2022 
                                                       GBP000    GBP000    GBP000    GBP000 
--------------------------------------------------  ---------  --------  --------  -------- 
Cash at bank and in hand                               18,408    17,787       191    36,386 
Bank debt                                            (17,008)  (42,189)         -  (59,197) 
IFRS 16 Right-of-use lease liabilities                (4,307)       601     (726)   (4,432) 
--------------------------------------------------  ---------  --------  --------  -------- 
Statutory net debt (including IFRS 16)                (2,907)  (23,801)     (535)  (27,243) 
Less: IFRS 16 Right-of-use lease liabilities            4,307     (601)       726     4,432 
--------------------------------------------------  ---------  --------  --------  -------- 
Statutory net cash/(debt) (excluding IFRS 16)           1,400  (24,402)       191  (22,811) 
Accrued acquisition consideration payable in cash 
 (note 9)                                                   -  (31,877)     (237)  (32,114) 
--------------------------------------------------  ---------  --------  --------  -------- 
Adjusted net cash/(debt)                                1,400  (56,279)      (46)  (54,925) 
--------------------------------------------------  ---------  --------  --------  -------- 
 

Non-cash items primarily represent foreign exchange differences on foreign currency bank balances and for IFRS 16, new and acquired leases.

The movement in borrowings over the period was as follows:

 
                                          2022     2021 
                                        GBP000   GBP000 
-------------------------------------  -------  ------- 
At 1 January                            17,008   21,215 
Net proceeds from drawdown of loans*    45,130        - 
Repayment of loans                     (2,941)  (1,879) 
Interest payable                           415      245 
Interest paid                            (415)    (245) 
-------------------------------------  -------  ------- 
At 30 June                              59,197   19,336 
-------------------------------------  -------  ------- 
 

* On 23 May 2022, GBP15.2 million of outstanding loans were repaid and GBP60.3 million was simultaneously reborrowed as the Group renewed its banking facilities (see note 10).

 
                                 2022     2021 
                               GBP000   GBP000 
----------------------------  -------  ------- 
Current                         6,679    4,657 
Non-current                    52,518   14,679 
----------------------------  -------  ------- 
Total borrowings at 30 June    59,197   19,336 
----------------------------  -------  ------- 
 

12. Defined benefit scheme

The Group's defined benefit pension scheme is a net asset of GBP0.0 million, compared to a net liability of GBP1.3 million at 31 December 2021, and GBP2.0m at 30 June 2021. The reduction in the liability is primarily due to an increase of 1.9% in the discount rate to 3.8% from 1.9% at 31 December 2021.

13. Dividends

During the period, the Company paid no dividends (period to 30 June 2021: GBPnil).

The Company paid a final dividend of 47.0p per share totalling GBP3.0 million to shareholders on 8 July 2022 relating to the financial year ended 31 December 2021.

The Company will pay an interim dividend for 2022 of 22.0p per share (2021: interim dividend of 19.0p per share) on 4 November 2022 to shareholders on the register on 7 October 2022. The shares will go ex-dividend on 6 October 2022.

14. Related party transaction

The acquisition of Geotek was originated by Charles Holroyd, a non-executive director of Judges. As with all Judges Scientific non-executive directors, and as disclosed in the Group's Annual Report and Accounts, he is incentivised to originate acquisitions on behalf of the Group. Accordingly, at the time of his appointment to the Board of Judges Scientific in 2018, he entered into an introduction agreement entitling him to the payment of a fee amounting to 1% of the enterprise value of any business that he introduced to the Group and was subsequently acquired by the Group ("Introduction Fee"). Based on the experience of the Group, the level of the Introduction Fee is materially lower than the fees charged by independent brokers.

Mr Holroyd was not involved in any part of the decision-making process in relation to the Acquisition. The Introduction Fee in relation to Geotek is payable at the same time and in the same proportion as the payments of the Initial Consideration and the Earn-out to the sellers; GBP450,000 at Completion and up to GBP350,000 on settlement of the Earn-out in 2023. Mr Holroyd elected to receive one half of his entire fee in new ordinary shares, valued at GBP76.80 per ordinary share, the same level as the share component of the Earn-out, and the other half in cash to enable him to pay the relevant taxation.

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(END) Dow Jones Newswires

September 22, 2022 02:01 ET (06:01 GMT)

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