21 March 2024
Judges Scientific
plc
("Judges
Scientific", "Judges", the "Company" or the "Group")
FINAL
RESULTS
Record performance and 95p
full year dividend
Judges
Scientific (AIM:JDG), a group focused on acquiring and developing
companies in the scientific instrument
sector, announces its final results for the year ended 31
December 2023.
Key
financials
|
Year
ended 31 December
|
2023
|
2022
|
|
Change
|
|
Revenue
|
£136.1m
|
£113.2m
|
|
20%
|
|
Adjusted* operating profit
|
£34.8m
|
£30.1m
|
|
16%
|
|
Tax on Adjusted earnings
|
£6.9m
|
£4.9m
|
|
41%
|
|
Adjusted* basic earnings per
share
|
374.6p
|
363.8p
|
|
3%
|
|
Cash generated from
operations
|
£31.3m
|
£24.0m
|
|
30%
|
|
Final dividend per share
|
68.0p
|
59.0p
|
|
|
|
Statutory operating profit
|
£21.6m
|
£18.2m
|
|
|
|
Statutory basic earnings per
share
|
145.8p
|
196.1p
|
|
|
|
|
|
|
|
|
|
As
at:
|
31 Dec 2023
|
31 Dec 2022
|
|
|
|
Adjusted* net debt (excl. IFRS
16)
|
£(45.1)m
|
£(52.0)m
|
|
|
|
Cash balances
|
£13.7m
|
£20.8m
|
|
|
|
Statutory net debt
|
£(51.6)m
|
£(39.1)m
|
|
|
Other financial highlights
· Organic** revenue increased 15% compared with 2022.
· Organic** order intake up 7% compared with 2022.
· Organic** order book at 17.0 weeks (2022: 21.1 weeks); total order book at 16.2
weeks.
· Proposed final dividend of 68p, totalling 95p for the year, an
increase of 17%; covered 3.9 times by Adjusted earnings.
Strategic Highlights
· Two
small acquisitions, Henniker Scientific and Bossa Nova Vision, for
a total consideration of £3.6m (including earn-out but excluding
excess cash).
· Strengthened Executive team following
the appointment of Dr Tim Prestidge as Group Business Development
Director in February 2023.
· Appointment of Sue Nyman to the Board as independent
non-executive director.
Outlook
· Commencing 2024 with a solid Organic order book.
· Timing
of next Geotek Coring expedition and its revenue recognition in
2024 remains uncertain.
· Supply
chain now returned to normal.
· YTD
Organic orders marginally behind 2023 comparative period, which
included exceptionally large post-lockdown contribution from
China.
· The
Board remains comfortable with current market
expectations.
* Adjusted earnings figures
exclude adjusting items relating to amortisation of acquired
intangible assets, acquisition-related costs, share based payments
and hedging of risks materialising after the end of the year.
Adjusted net debt includes acquisition-related liabilities and
excludes IFRS 16 liabilities.
** Organic describes the
performance of the Group including businesses acquired prior
to 1 January 2022.
Alex Hambro, Chairman of Judges Scientific,
commented:
"The Group has again beaten its previous records in Organic
order intake, revenue, Adjusted operating profit, cash generation
and Adjusted earnings per share in an improving but still
challenging environment. We are delighted that the proposed
dividend for the full year has now equalled the Group's original
IPO price.
Another year of records in our performance metrics illustrates
the quality and dedication of all our colleagues at every level. I
trust our shareholders will join the Board in thanking them for
delivering these results.
In
addition, a special note of thanks to Ralph Cohen for his immense
18-year contribution to the company in both an executive and
non-executive capacity."
Investor Presentation
Judges Scientific is hosting a
webinar, available to all existing and potential shareholders,
covering the results for the year ended 31 December 2023, on
21 March 16:45 UK time. Investors can register for the
webinar here:
https://bit.ly/JDG_FY23_results_webinar
For further information please
contact:
|
Judges Scientific plc
David Cicurel, CEO
Brad Ormsby, CFO
Tel: +44 (0) 20 3829
6970
|
Shore Capital (Nominated Adviser
& Joint Broker)
Stephane Auton
Iain Sexton
Tel: +44 (0) 20 7408 4090
|
|
|
Liberum (Joint Broker)
Edward Mansfield
Nikhil Varghese
Tel : +44 (0) 20 3100
2222
|
Investec Bank plc (Joint
Broker)
Virginia Bull
Carlton Nelson
Tel: +44 (0) 20 7597 4000
|
|
|
Alma Strategic (Financial Public
Relations)
Sam Modlin
Rebecca Sanders-Hewett
Joe Pederzolli
Tel: +44 (0) 20 3405 0205
judges@almastrategic.com
|
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Notes to editors:
Judges Scientific plc (AIM:
JDG), is a group focused on acquiring and developing companies in
the scientific instrument sector. The Group consists of 23
businesses acquired since 2005.
The acquired companies are
primarily UK-based with products sold worldwide to a diverse
range of markets including: higher education institutions,
scientific research facilities, manufacturers and regulatory
authorities. The UK is a recognised centre of excellence
for scientific instruments. The Group has received five
Queen's Awards for innovation and export.
The Group's companies predominantly
operate in global niche markets, with long term growth fundamentals
and resilient margins.
Judges Scientific maintains a
policy of selectively acquiring businesses that generate
sustainable profits and cash. Shareholder returns are created
through the reduction of debt, organic growth and
dividends.
For further information, please
visit www.judges.uk.com
Chairman's Statement
The year started in a positive
fashion, following the final re-opening of China after successive
Covid lockdowns. An exceptionally good order intake in December
2022 laid the foundations for a strong 2023 and the alleviation of
supply chain issues during the year enabled the Group to achieve
new records in Organic order intake, Organic revenue and Organic
Adjusted profits. Pre-tax profits (including a full year of Geotek
and the contribution of two small acquisitions completed in the
spring) and cash generation also reached record levels as well as
Adjusted earnings per share, although as previously highlighted to
shareholders, the increased UK corporate tax rate tempered post-tax
growth.
Generating attractive returns for
our shareholders remains the core purpose of the Group. As such,
the Board is pleased to be recommending a final dividend of 68p,
for a total dividend of 95p in respect of 2023, which was a 17%
increase on the prior year (2022: 81p), whilst retaining ample
cover of 3.9 times to enable sustained progression in line with the
Group's dividend policy. Since the payment of the first dividend in
respect of 2006, regular dividends have grown at a compound annual
rate of 23% and total dividend distributions have aggregated to
7.5x the 2005 re-admission price of 100p. Your Board is delighted
to be recommending the payment of a total dividend for the year
equal to the placing price paid by all shareholders when the shares
were first admitted in 2003, demonstrating Judges' well-established
track record of delivering both growth and shareholder
value.
Strategy
The Group's strategy remains
unchanged and is based on creating attractive returns through
highly selective and carefully structured acquisitions, underpinned
by the diversified, solid and growing earnings and cashflows
arising from our existing businesses.
The Group's acquisition model is to
acquire small/medium-sized scientific instrument manufacturers,
paying a disciplined multiple of earnings and to finance any
acquisition, ideally, through existing cash resources and/or bank
borrowings. We remain highly selective in seeking to acquire
businesses with a history of sustainable profits and cashflows, to
obtain immediate and enduring earnings enhancement for our
shareholders. It is paramount that acquisitions are completed only
when the Directors are satisfied that the target business has sound
underlying strength with robust and defensible margins and is
acquired at a sensible multiple.
Post-acquisition, the Group provides
a favourable environment for these businesses to continue to
prosper. Much executive effort is invested into helping their
autonomous management teams improve their quality in terms
of talent, leadership, innovation,
geographic reach, production speed/quality and financial
control. Organic revenue growth and
operational improvements are an ever-growing component of
shareholder returns.
As a result of the dependable growth
of your Group, it has been possible to promptly reduce debt,
thereby generating the financial resources necessary to reinvest in
further acquisitions and reward shareholders with a progressively
increasing dividend, subject always to our prudent approach to
gearing and earnings cover.
The underlying global market for
scientific instrumentation remains robust and the sector's
long-term growth drivers provide comfort that the Group will
continue to deliver durable returns for our shareholders despite
the potential for some short-term variability in performance. These
long-term market drivers are rooted in the global expansion of
higher education; the need for measurement tools to support the
relentless worldwide search for optimisation and the desire for
discovery across industry and science.
The nature of Judges' business
model, combined with management's consistent execution of its
strategy, has generated excellent returns for investors. Sustained
growth has been delivered through our business model clearly seen
through the long-term compound annual growth rate ("CAGR") for
revenue and profit, both for the Group as whole and also on an
Organic basis. Over the past 17 years, the Group has provided
shareholders with a total revenue CAGR of 21% and related EBIT
growth of 28% and the Organic measure is 8% and 11% respectively.
Our disciplined approach to acquisitions allied with the
aforementioned performance, has resulted in maintaining Return on
Total Invested Capital ("ROTIC") of comfortably over 20% and with
the Group's strong ability to convert profit into cash, has enabled
us to stick to our policy of increasing the dividend by a minimum
of 10% per year with compound annual growth of 23% also over the
past 17 years.
Our
team
Another year of records in our
performance metrics illustrates the quality and dedication of all
our colleagues at every level. I trust our shareholders will join
the Board in thanking them for delivering these results.
Early in the year, our Board was
delighted to strengthen our Executive team with the appointment of
Dr Tim Prestidge, as Group Business Development Director. Tim
has significant and relevant experience having spent his career to
date in senior roles at both Renishaw plc and Halma plc. He is
already making a substantial contribution to the future growth of
our Group.
In November, the Board welcomed Sue
Nyman as a non-executive director; she
brings extensive public company and governance experience to the
Board and we look forward to working with her as the Group
continues to execute its growth strategy.
Ralph Cohen retired at the end
of the year after 18 years with Judges, initially as finance
director and latterly as a non-executive director. His contribution
to the Group and its culture has been invaluable and he has
overseen a period of substantial corporate growth and increase in
shareholder value and the Board, on behalf of the shareholders,
thanks him for his service to the Group.
Alex Hambro
Chairman
20 March 2024
Chief Executive's Report
2023 started on a positive note as
the impact of Covid was finally abating and China had put an end to
a succession of strict lockdowns. This resulted in a strong influx
of orders in December 2022 particularly from China, which gave us a
larger than usual opening order book, which alongside the
progressive alleviation of supply chain difficulties, ensured
healthy revenue growth. The Group's solid market positioning and
continued favourable exchange rates enabled it to mitigate
inflationary pressures, and operating margins were maintained. This
translated into new record Organic revenues, Adjusted pre-tax
profits, cash generation and Adjusted earnings per share. A full
year of Geotek and two small acquisitions in the spring contributed
to the Group's performance. As previously noted, this and the
Organic achievements were largely absorbed by higher tax rates,
increased borrowing costs and some dilution from the issue of new
shares in respect of half of the Geotek earn-out.
We were pleased to have navigated
the inflationary environment and to have maintained margins at our
Organic businesses. The supply chain difficulties, previously
encountered by the Group, mostly abated during the year which
enabled our businesses to increase capacity, thereby reducing
lead-times for our customers, and returning the order book back to
more usual levels. Overall, more than half of our Organic
businesses were therefore able to deliver record profits in 2023.
We continue to focus on operational and business information
improvements and also piloted a new approach to R&D projects
which we hope to roll out across the Group. We also welcomed
several new leaders this year with our continued focus on having
the highest quality management teams, who are relentless in
delivering incremental growth and new and improved products with
which to support the requirements of our ever increasing customer
base.
Order intake
Order intake is the main driver of
our business. Organic intake was up 7% year-on-year. This shows a
compound growth of 4% since the pre-Covid 2019 record. Although
Organic intake made solid progress, this was not uniform and a few
of our smaller Organic businesses still found it challenging to
restore order intake to 2019 levels.
The strongest region was the UK (30%
up on 2022 but this included one large single order), followed by
China/Hong Kong (up 27%). The rest of Europe and North America were
both 4% up and the Rest of the World was down 11%. The best
absolute performances by country were achieved in the UK,
China/Hong Kong and the USA and the worst in Australia and South
Africa.
Total Group intake was affected by
the fact that the Geotek coring expedition conducted in 2023, had
already been booked in 2022.
Revenues
Group revenues for the financial
year ended 31 December 2023 progressed from £113
million to £136 million, including Organic growth of 15%,
the full-year contribution from Geotek and the part-year
contribution of the acquisitions completed during 2023.
Supply chain issues that previously
impacted the Group alleviated during 2023, enabling the Group to
convert some of a large order book into sales revenue and hence
Organic revenue grew 15% to reach £113m, a new record. Most Group
companies have successfully and progressively reduced their large
order book. As Organic revenue exceeded Organic intake by £3m, this
produced a small absolute reduction in the Organic order book. When
measured in weeks (in accordance with budgeted Organic revenue of
the following year) it receded from 21.1 weeks at 31 December
2022 to 17.0 weeks at the end of 2023. The total order book
at 31 December 2023 stood at 16.2 weeks.
The Group continues to be a strong
exporter and is well diversified, both via its end markets and
across the globe, with 28% of the Group's revenues earned
in North America, 25% in the Rest of Europe and 14%
in China/Hong Kong. Organic revenues grew in all
regions: China/Hong Kong progressed 33% and the Rest of
the World 31%; North America advanced 16%.
The UK grew 4% and the Rest of Europe 2%. The
highest absolute increases were China/Hong Kong, the US, Taiwan,
South Africa and Japan; the most notable decreases were Germany and
the Czech Republic.
Profits
The most important driver of Judges'
operating margins is volume. The 15% growth in Organic revenue
maintained our Organic EBITA margin before central costs at 25%
(2022: 25%). Inflationary pressures and the resumption of travel
and exhibition costs were well absorbed thanks to our strong market
positions and favourable exchange rates. The growth in Organic
revenue produced growth of 17% in Adjusted Organic EBIT
contribution; this was supplemented by the two small acquisitions
made in 2023, and by a full year of Geotek which generated EBIT
that was 9% lower than its earn-out EBIT threshold.
Adjusted profit before tax
progressed to a record £31.7m (2022: £28.3m). Return
on Total Invested Capital ("ROTIC") progressed to 22.7%
(2022: 20.6% adjusted as explained in the Chief Financial Officer's
report) . Statutory profit before tax
was £13.4m (2022: £16.0m), reflecting a full year
impact of large adjusting items primarily arising from the
amortisation of acquired intangible assets and of the premium on
the shares issued in respect of the Geotek earnout.
The Group continued to invest in the
improvement of its existing products and the development of new
products. Investment in research and development amounted
to £7.8m in 2023 (2022: £6.8m), equivalent to 5.7%
of Group revenue (2022: 6.0%).
The 12% increase in Adjusted pre-tax
profit did not produce a similar increase in EPS, due largely to
the increase in tax rates in April 2023 from 19% to 25% and, to a
lesser degree, to the issue of shares in respect of the Geotek
earn-out. Adjusted earnings per share progressed by 3% to 374.6p
from 363.8p; adjusted fully diluted earnings per share similarly
progressed to 368.5p (2022: 359.0p). Statutory basic earnings per
share were 145.8p (2022: 196.1p) and statutory diluted earnings per
share were 143.5p (2022: 193.5p) affected by the large non-cash
adjusting items.
Cashflow
Cash conversion was still
impacted by caution and an appropriate
desire to avoid any return to the lengthy delays for our customers
that the long-persisting supply chain difficulties had
caused. It was improved but lower than
usual at 90% (2022: 80%), with cash generated from operations
of £31.3m (2022: £24.0m). Cash conversion is an
essential element of our business model and we must strive to
return to our pre Covid/Ukraine performance in this
area.
Year-end cash balances decreased
to £13.7m from £20.8m at 31 December 2022. Adjusted
net debt (excluding IFRS 16 lease liabilities but including sums
still due in respect of acquisitions) at the year-end amounted
to £45.1 m (2022: £52.0m).
Corporate activity
Geotek, which the Group acquired in
May 2022, delivered sufficient profits during that calendar year to
trigger the payment of the maximum £35m earn-out, half payable in
shares, half in cash. This was settled in the first half of
2023.
On 3 April 2023, the Group acquired
100% of the issued share capital of Henniker Scientific Limited
("Henniker"), a leading supplier of instruments, systems &
technologies for plasma and surface science applications, supplying
solutions for cleaning, surface activation to improve adhesion and
functional nano-scale coatings, for a total price capped at £2.3m
including £1.85m at completion and an earn-out capped at
£0.46m.
On 2 May 2023, our subsidiary
Dia-Stron acquired 100% of the issued share capital of Bossa Nova
Vision LLC ("BNV"), a company specialising in imaging measurement
technology for the cosmetics industry based in Los Angeles,
California, USA, for $1.6m in cash.
Post year-end, on 1 February 2024,
our subsidiary PE.fiberoptics acquired 100% of the shares of Luciol
Instruments SA ("Luciol") for CHF 2m plus a potential earn-out
capped at CHF 0.5m.
The Board believes that the BNV and
Luciol transactions have synergistic potential with other
businesses in our Group. Given the widening number of sectors we
operate in, it naturally becomes more likely that we will acquire
businesses adjacent to existing Group activities.
As a buy and build focused group,
the acquisition of new businesses is a fundamental feature of the
Group's strategy. Executing this effectively ensures that long-term
value is generated for shareholders. We retain a strict acquisition
discipline and are highly selective in relation to both the
acquisition multiple and long-term quality of any potential
addition to our Group.
The industry in which we operate
contains a multitude of small global niches, as illustrated by the
diverse nature of the new entrants to our Group.
The UK is recognised in this arena as a centre of
excellence for product innovation and manufacturing with
world-leading businesses. Our Group has built a strong reputation
over the past decade as an ethical, experienced and well-financed
buyer and a supportive home for businesses in our sector whose
owners wish to sell. We are trusted to act decisively and to
complete deals under the initial terms agreed. For the businesses
we acquire, the Group offers advice and support wherever necessary,
stimulates intra-group cooperation, participates in succession
planning and implements robust financial controls. We trust
subsidiary management teams with the day-to-day running of their
businesses. This has been a successful operating model for the
Group, as management teams are given responsibility for their own
destinies, as well as an environment in which they can
thrive.
Dividends
The Board is recommending a final
dividend of 68p per share subject to approval at the forthcoming
Annual General Meeting on 21 May 2024, which will make a total
distribution of 95p per share in respect of 2023 (2022: 81p per
share). The total dividend per share is 3.9 times covered by
adjusted earnings per share (2022: 4.5 times). Our policy of
increasing the dividend by a minimum of 10% per year remains
sustainable as long as we have ample cover.
The proposed final dividend, if
approved by shareholders, will be payable on Friday 5 July
2024 to shareholders on the register on Friday 7 June 2024. The
shares will go ex-dividend on Thursday 6 June 2024.
The Company's shareholders are
reminded that a Dividend Reinvestment Plan (DRIP) is in place to
enable shareholders to automatically reinvest their dividends into
additional Judges shares should they so wish.
Trading environment
The long-term fundamentals
supporting demand for scientific instruments and related techniques
and services remain positive. In addition to the global expansion
of higher education, market demand is driven by continuing strong
worldwide growth of scientific research across academic, corporate,
and industrial sectors, and the increasing number of industrial
applications for scientific techniques and technologies driven by
the enduring pursuit for process control and optimisation. Of
course, control and optimisation require measurement.
In parallel to these positive
long-term trends, the markets across which Judges and its peers
operate are also characterised by a degree of shorter-term
variability, influenced mostly by government spending, research
funding, currency fluctuations and the business climate in major
trading blocs, particularly
the USA and China.
In the medium-term, the competing
goals in the various jurisdictions where the Group operates, of
stimulating recovery and of reducing ballooning government deficits
should increase uncertainty in worldwide research funding. Whilst
it now appears that inflation may finally be under control and
interest rates could slowly decline, government debt worldwide is
an issue and may cause the return of austerity.
As a large percentage of the Group's
revenue is overseas, exchange rates have a significant influence on
the Group's business. Judges' manufacturing costs are largely
denominated in Sterling and most of the Group's revenue originates
from countries where the standard of value is the US Dollar
(approximately one half of total revenue) or the Euro (around one
third of total revenue). The currency movements since the Brexit
referendum vote in 2016 have had a positive influence on our
margins and our competitiveness; exchange rates have continued to
remain favourable to our Group although Sterling firmed up toward
the year-end.
Outlook
Judges' business is very
international and thrives with peace and free trade. The macro
environment remains uncertain, and while the disruptions due to
Covid and the war in Ukraine have now receded, the after-effect of
budget deficits may still make itself felt on research budgets in
the years to come. Despite the elevated tensions in the world,
which are of great concern, the resilience and adaptability of the
Group, combined with supportive long-term drivers, provide
confidence in the ongoing delivery of durable returns for
shareholders.
For the immediate future, the new
year has started with a healthy order book; order intake for the
first eleven weeks of the year has been marginally below the 2023
comparative which included an exceptionally large post-lockdown
contribution from China. At this point, we are still envisaging
another coring expedition during the course of 2024, however,
Geotek has not yet contracted for this expedition and there is
uncertainty regarding its timing and the amount of any related
revenue to be recognised in 2024.
Exchange rates remain favourable to
the Group's competitive position but this year will see the final
impact of the April 2023 corporation tax rate increases. The Board
remains comfortable with current market expectations.
David Cicurel
Chief Executive
20 March 2024
Chief Financial Officer's Report
The Group's strategy is based on
acquiring companies within the scientific instruments sector and
ensuring continued profitable performance and growth at its
existing subsidiary businesses.
Key
Performance Indicators
The Group's financial Key
Performance Indicators ("KPIs"), which are aligned with the ability
to deliver Organic growth, reduce acquisition debt and fund
dividend payments to shareholders, are Adjusted basic earnings per
share, Adjusted Organic operating margins, Organic return on total
invested capital and cash conversion. We have a further
non-financial KPI of Organic order intake which is the bellwether
of future short-term financial performance. All five KPIs are
commented on during this report.
|
|
2023
|
2022
|
|
Adjusted basic earnings per
share
|
374.6p
|
363.8p
|
|
Adjusted Organic operating profit
margin
|
20.5%
|
21.5%
|
|
Organic return on total invested
capital
|
33.5%
|
28.7%
|
|
Cash conversion
|
90%
|
80%
|
|
Organic order intake
|
+7%
|
+0.5%
|
Alternative performance measures
The Group uses alternative
performance measures ("APMs") in order to provide readers of the
accounts with a clearer picture of the Group's actual trading
performance and future prospects. Amongst these measures are: (1)
Organic, which describes the performance of the
Group only including those businesses acquired prior to the
start of the comparative period, and for these accounts the
reference date is 1 January 2022; (2) Adjusted earnings figures, which exclude adjusting items (as
disclosed in note 3); (3) Adjusted net debt, which (a) includes
acquisition payables not yet settled at the Balance sheet date and
(b) excludes IFRS 16 lease liabilities; and (4)
Return on total invested capital and cash
conversion which are defined within the relevant sections of this
report.
Revenue
Group revenues increased from
£113.2m in 2022 to £136.1m, an increase of 20%. Organic revenues
improved by 15% (2022: Organic growth of 8%) supported by a strong
opening order book and full year Organic order intake, itself ahead
of 2022 by 7%. The remainder of the increased revenue arose from a
full year's ownership of Geotek and from the two small acquisitions
of Henniker and BNV during the year.
Across our two segments, Materials
Sciences total revenues rose by £12.6m to £72.5m (2022: £59.9m) and
Vacuum revenues increased by £10.3m to £63.6m (2022:
£53.3m).
Profits
Adjusted operating profit increased
from £30.1m to £34.8m as a result of the strong revenue growth. We
benefited from improved supply chain conditions which allowed our
Organic businesses to deliver a higher capacity and whilst costs
did increase, as travel and marketing returned to more normal
pre-Covid levels, we were able to offset this with suitably
balanced price increases, the consequence of which meant that we
were able to maintain our Organic operating margins (before central
costs) however Adjusted Organic operating margins reduced from
21.5% to 20.5% due to increased central costs, including the
recruitment of one additional executive director. Total Adjusted
operating margin similarly reduced from 26.6% to 25.6%.
Sterling remained stable on average
against both the Euro and US Dollar across the year which enabled
us to maintain our competitiveness as a high exporter and, overall,
exchange rates continue to be usefully positioned for the
Group.
Statutory operating profit increased
to £21.6m (2022: £18.2m), and statutory profit before tax was
£13.4m compared to £16.0m in 2022. Both figures were affected by
significantly increased adjusting items, which are detailed further
below and, for the profit before tax figure, also increased
borrowing costs.
Capitalisation of development costs
We capitalised £1.2m (2022: £1.5m)
of our total R&D expense relating to development of new or
significantly improved products. Amortisation on the total amounts
capitalised (inclusive of prior years) is £0.4m (2022: £0.1m)
reflecting an increase in the number of completed projects this
year. Many projects are still not yet commercialised, often due to
long lead times in acquiring parts to complete prototypes, and
hence these products are not yet production ready.
Adjusting items
£18.3m of pre-tax adjusting items
were recorded in 2023 (2022: £12.3m). The two main constituents
were £11.8m of amortisation of the intangible assets recognised
upon acquisition (2022: £8.4m), primarily arising as a result of
the acquisition of Geotek, together with a £4.0m charge primarily
relating to the difference between the market value of the new
Judges shares issued for the equity component of the Geotek
earn-out compared 31 December 2022 share price. IFRS prohibits adjusting the total acquisition consideration
for the post-acquisition change in share price so it is instead
recorded as an expense.
Finance costs
Net finance costs (excluding
adjusting items) totalled £3.1m (2022: £1.8m). The higher interest
charge reflects (i) a full year of holding a higher debt following
the May 2022 acquisition of Geotek, which was fixed at
approximately 5% (including margin) via an interest rate swap taken
out in 2022, (ii) an additional net £10m borrowed in 2023 as part
of settling the cash element of the Geotek earn-out and is unhedged
at higher interest rates.
The vast majority of the Group's
borrowings are hedged, which ensures that a risk of rising or
consistently higher interest rates has been mitigated for the
duration of the Group's existing facilities.
Statutory net finance costs were
£8.2m (2022: £2.2m). The two key items reconciling between the
Adjusted and statutory figures are a £4.0m expense for the fair
value movements on the Geotek deferred consideration (2022: £2.6m)
and a £1.2m debit relating to the valuation of the interest rate
hedging (2022: £2.3m credit).
Taxation
The Group's tax charge arising from
Adjusted profit before tax was £6.9m (2022: £4.9m). The effective
tax rate on Adjusted profits of 21.8% compares with 17.2% in 2022
and the percentage increase is largely related to the increase in
UK corporation tax rates at the start of April 2023 from 19% to
25%, as was signposted to shareholders in last year's annual
report. This 6% increase for three-quarters of the year
mathematically equates to a 4.5% rate increase, and therefore
aligns closely to the increase in the effective tax rate. For 2024,
we expect to have a full year of the 6% increase, such that the
Group's tax rate will again rise closer to the UK's prevailing
rate.
One upside relating to tax, was
announced by the UK government during 2023 in relation to changes
to the UK research and development tax scheme which improves the
credit attainable from the large companies R&D scheme, such
that there is less of a gap between the benefits attainable under
small and large companies R&D schemes.
Earnings per share
Adjusted basic earnings per share
improved by 3% to 374.6p from 363.8p and Adjusted diluted earnings
per share was a similar percentage higher at 368.5p (2022: 359.0p).
This small increase in Adjusted earnings per share compares with a
12% increase in Adjusted profit before tax. The aforementioned 4.5%
increase in effective tax rate equates to over £1.4m additional tax
payable which is approximately 22p of earnings per share. Without
this tax rate change in 2023, Adjusted basic earnings per share
would have been 396.6p.
Statutory basic and diluted earnings
per share have significantly reduced as a result of the higher
adjusting items as explained in the Adjusting items section of this
report. Statutory basic earnings per share was 145.8p (2022:
196.1p) and statutory diluted earnings per share totalled 143.5p
(2022: 193.5p).
Order intake
Organic order intake for 2023 was 7%
above the prior year figure, and remained ahead of revenue for most
of the year. Your Board considers order intake and the resultant
year-end order book as an important bellwether to the Group's
ability to achieve its expected results, and this intake resulted
in a closing Organic order book at 31 December 2023 of 17.0 weeks
of budgeted sales (31 December 2022: 21.1 weeks). Total order book
was 16.2 weeks inclusive of the acquisitions of Henniker and BNV.
For 2024 Geotek is now part of the Organic group of
companies.
Adjustment to 2022 Geotek acquisition
consideration
During review of the settlement of
the Geotek contingent consideration, it was identified that the
contingent consideration balance should have been £2.2m higher at
the acquisition date with a corresponding increase in Goodwill, as
the equity share component of the contingent consideration should
have been measured by reference to the fair value of the Judges
share price. This adjustment therefore had no impact on net assets
at 31 December 2022 and had no impact on profit for the year ended
31 December 2022.
Return on Capital
The Group closely monitors the
return it derives on the capital invested in its subsidiaries. The
annual rate of Return on Total Invested Capital ("ROTIC") at 31
December 2023 on an Organic basis was 33.5% (2022: 28.7%). This is
as a result of overall performance improvement during 2023 whilst
noting some variability in the performance of our group of
businesses.
The annual rate of ROTIC is
calculated by comparing attributable earnings excluding central
costs, adjusting items and before interest, tax and amortisation
("EBITA") with the amounts invested in plant and equipment, net
current assets (excluding cash) and unamortised intangible assets
and goodwill (as recognised at the initial acquisition date)
together with any acquisition costs and any increases to
acquisition consideration post-acquisition date.
Last year we presented an Organic
and total ROTIC as a result of the effect of the significant
acquisition of Geotek, which was both the largest and highest
multiple paid in Judges' history. Within the ROTIC calculation, we
have finalised the total consideration for this acquisition, and it
reflects the value of the equity component of the earn-out having
increased from £17.5m to £23m on settlement. This increase has
accordingly been included within the ROTIC calculation from the
date of acquisition. The consequential effect of the Geotek
acquisition, on the Group's total ROTIC, adjusted to the date of
acquisition, was a reduction of 8.1% and hence total ROTIC was
amended to 20.6% at 31 December 2022. The overall Group figure for
the year ended 31 December 2023 progressed to 22.7%.
Dividends
For the financial year ended 31
December 2023 the Company paid an interim dividend of 27.0p per
share in November 2023 (2022: 22.0p per share). Following a good
performance in 2023, albeit with earnings per share impacted by the
increased corporate tax rates, the Board is recommending a final
dividend of 68.0p per share giving a 17% increase in the total
dividend for the year of 95.0p per share (2022: 81.0p per share).
Dividend cover is approximately 3.9 times Adjusted basic earnings
per share (2022: 4.5 times).
The Group's policy is to pay a
progressively increasing dividend, with an annual minimum increase
of at least 10% (dependent on the Group's performance), covered by
earnings provided the Group retains sufficient cash and borrowing
resources with which to pursue its longstanding acquisition
strategy.
Headcount
The Group's full time equivalent
("FTE") employees for 2023 stood at 682 (2022: 595). This growth
reflects recruitment in support of the Group's long-term growth
strategy, the acquisitions of Henniker and BNV, coupled with a full
year effect of our May 2022 acquisition of Geotek.
Share capital and share options
The Group's issued share capital at
31 December 2023 totalled 6,615,717 Ordinary shares (2022:
6,369,746). The vast majority of the shares issued during 2023 were
to satisfy acquisition consideration for the Geotek earnout. The
remaining share issues related to the exercise of share options by
various members of staff during the year and settlement in ordinary
shares of a portion of the introduction fee payable to Charles
Holroyd for the acquisition of Geotek (see note 9 for further
details).
Share options issued during the year
under the 2015 scheme totalled 85,759 (2022: 4,735), most of which
were issued to the Executive Directors, and the total share options
in issue at the year-end under both the 2005 and 2015 schemes
amounted to 254,169 (2022: 184,740).
Defined benefit pension scheme
The Group has a defined benefit
pension scheme which was acquired with Armfield in 2015. This
scheme has been closed to new members from 2001 and closed to new
accrual in 2006. The latest triennial full actuarial valuation was
performed in March 2023 which resulted in a surplus for the scheme
with no further deficit reduction contributions being required.
Previous annual contributions were £0.4m.
The Group accounts for
post-retirement benefits in accordance with IAS 19 Employment
Benefits. The Consolidated balance sheet reflects the net surplus
or deficit on the pension scheme, based on the market value of the
assets of the scheme and the valuation of liabilities using year
end AA corporate bond yields. At 31 December 2023, the pension
scheme was in a position of a £1.1m surplus (net of deferred tax)
(31 December 2022: £0.9m net surplus). This movement is explained
through an improved fund asset performance offset by the higher
deferred tax rate.
Following the outcome of the
triennial valuation, the Trustees of the scheme took steps to
secure the pension surplus by aligning the asset management
strategy with the expected future pension outflows to the members
of the scheme.
In March 2024, the Trustees entered
into a buy-in policy with an insurance company. This policy secures
payment of all future pensions due to the scheme's members in
relation to their pensions.
Cashflow and net debt
The Group has an enduring track
record of converting profits into cash and this year's profitable
trading delivered a strong cash performance with cash generated
from operations of £31.3m (2022: £24.0m). Our cash conversion rate,
which compares cash generated from operations with Adjusted
operating profit, was 90%, an improvement on 2022's 80% but still
below our expectations of a 90+% conversion rate. Whilst global
supply chain issues abated and allowed us to increase capacity this
year, we still were faced with many of our businesses feeling the
need to maintain historically high inventory levels, partly due to
supply chain conservatism. We are keenly aware that reducing
component levels will be essential as part of good working capital
management in driving our expected cash conversion, but it is not a
quick fix when managing important supplier relationships for the
long-term.
Total capital expenditure on
property, plant and equipment amounted to £4.7m (2022: £6.4m).
Whilst nearly £2m lower than 2022, this year's figure remains
higher than usual due to ongoing property purchases and/or
refurbishments for our trading businesses as a number have either
moved or are in the process of moving facility.
We started this year with £52.0m of
Adjusted net debt and ended the year with £45.1m. Adjusted net debt includes acquisition-related cash payables
that had yet to be settled at the balance sheet date and excludes
IFRS 16 liabilities. The Group uses
Adjusted net debt rather than statutory net debt, as this figure
includes actual cash liabilities arising from acquisitions which
are due within one year. Gearing,
calculated as the proportion of Adjusted net cash/debt compared to
Adjusted earnings before interest, tax, depreciation and
amortisation ("EBITDA"), at 31 December 2023 was 1.38 times (2022:
1.6 times). We remain committed to maintaining a prudent gearing
position whilst at the same time taking the opportunities of
acquiring strong, sound businesses at disciplined multiples. We
acquired Henniker and BNV for a combined cash consideration of
£3.6m (including contingent consideration). We also paid £5.7m of dividends to shareholders, £4.8m for our
tax liabilities, and invested £4.7m in capital expenditure; an
overall £18.8m outflow and we still managed to decrease net debt by
£6.9m. This illustrates to shareholders the Group's cash generating
capability and its ability to de-leverage. In 2023, we also
settled the full Geotek earn-out, paying £17.5m
cash (the full earn out was £35m and was payable 50% in cash and
50% in new Judges shares) although this amount was already largely
captured within Adjusted net debt at the start of the
year.
Our Group's multi-bank facility
("Facility") with Lloyds Banking Group plc, Santander UK plc and
Bank of Ireland (the "Banks") is for an aggregate
£100m consisting of a £25m term loan ("Term Loan"), a committed
£55m revolving credit facility ("RCF") plus a £20m uncommitted
accordion facility, which can be drawn with the agreement of the
Banks and had a four-year term expiring on 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
are:
·
Gearing no greater than 3.0 times Adjusted EBITDA;
and
·
Interest cover no less than 3.0 times.
Interest rate margins are consistent
with the previous facilities, save for an additional rate between
2.5 and 3.0 times gearing.
This Facility provides the Group, in
support of its buy and build strategy, with greater acquisition
capacity, both in terms of higher frequency and of size.
At the year end the Term Loan was £14.1m (2022: £20.3m) and the RCF was £44.3m
drawn (2022: £35.3m drawn), with £10.7m available to drawdown for
future acquisitions alongside the £20m accordion should it be
required to be converted from uncommitted to committed
borrowings.
We continue to greatly appreciate
the unwavering support of our three long-term relationship lenders,
Lloyds Banking Group plc, Santander UK plc and Bank of Ireland, who
all understand and champion the execution of the Group's buy and
build strategy.
Year-end cash balances totalled
£13.7m (2022: £20.8m). In previous years when the
Group had low net debt and interest rates were lower, there was
little effect on the Group's performance in maintaining optimised
levels of cash compared with paying down debt, however with higher
net debt and in this higher interest rate environment, there is a
greater benefit for shareholders in carrying a lower level of cash
to allow unhedged debt to be repaid as and when cashflows allow.
Whilst rates remain higher, we will continue to encourage our
businesses to improve their working capital positions to generate
higher cash conversion, in order that we can repay unhedged debt as
quickly as possible, subject to our usual caveat of funding future
acquisitions.
Overall, 2023 was positive for the
Group, supported by a team that continue to deliver improvements
every year, despite the wider economic and geopolitical challenges
that abound. Organic growth continued, cash generation improved,
and we maintained a healthy balance sheet with conservative
leverage. Consequently, we remain well positioned to continue the
Group's strategy of delivering growth in earnings via selective,
reasonably priced acquisitions of strong niche businesses in the
scientific instruments sector, alongside encouraging long-term
organic growth in its existing group of businesses.
Brad Ormsby
Chief Financial Officer
20 March 2024
Consolidated statement of comprehensive
income
For the year ended 31 December
2023
|
|
|
|
|
|
|
|
|
|
Revenue
|
2
|
136.1
|
-
|
136.1
|
113.2
|
-
|
113.2
|
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss)
|
|
34.8
|
(13.2)
|
21.6
|
30.1
|
(11.9)
|
18.2
|
|
Interest income
|
|
0.3
|
0.1
|
0.4
|
0.2
|
-
|
0.2
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax
|
|
31.7
|
(18.3)
|
13.4
|
28.3
|
(12.3)
|
16.0
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the
year
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
24.4
|
(14.9)
|
9.5
|
23.1
|
(10.6)
|
12.5
|
Non-controlling interests
|
|
|
|
|
|
|
|
Profit/(loss) for the
year
|
|
|
|
|
|
|
|
|
Other comprehensive
income
|
|
|
|
|
|
|
|
|
Items that will not be reclassified
subsequently to profit or loss
|
|
|
|
|
|
|
|
|
Retirement benefits actuarial
gain
|
|
|
|
0.1
|
|
|
2.1
|
|
Deferred tax on retirement benefits
actuarial gain
|
|
|
|
-
|
|
|
(0.5)
|
|
Items that may be reclassified
subsequently to profit or loss
|
|
|
|
|
|
|
|
Exchange differences on translation
of foreign subsidiaries
|
|
|
|
|
|
|
|
Other comprehensive income
for the year, net of tax
|
|
|
|
|
|
|
|
Total comprehensive income
for the year
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
9.5
|
|
|
14.2
|
Non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
adjusted
|
|
|
|
|
|
|
|
|
Basic
|
1
|
374.6
|
|
|
363.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
total
|
|
|
|
|
|
|
|
|
Basic
|
1
|
|
|
145.8
|
|
|
196.1
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of
these consolidated financial statements.
Consolidated balance sheet
As at 31 December 2023
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Non-current assets
|
|
|
|
|
Goodwill
|
4
|
54.8
|
53.6
|
|
Other intangible assets
|
5
|
35.6
|
44.4
|
|
Property, plant and
equipment
|
|
19.8
|
15.9
|
|
Right-of-use leased
assets
|
|
6.6
|
4.2
|
|
Retirement benefit
surplus
|
|
1.4
|
1.2
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Inventories
|
|
26.5
|
22.3
|
|
Trade and other
receivables
|
|
25.1
|
25.6
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
|
(24.6)
|
(25.9)
|
|
Payables relating to
acquisitions
|
|
(0.5)
|
(36.5)
|
|
Borrowings
|
6
|
(6.2)
|
(6.2)
|
|
Right-of-use lease
liabilities
|
|
(1.2)
|
(1.0)
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Borrowings
|
6
|
(52.2)
|
(49.4)
|
|
Right-of-use lease
liabilities
|
|
(5.7)
|
(3.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
Share capital
|
|
0.3
|
0.3
|
|
Share premium account
|
|
17.7
|
17.2
|
|
Other reserves
|
|
26.9
|
4.1
|
|
|
|
|
|
Equity attributable to owners of the
parent company
|
|
|
|
Non-controlling interests
|
|
|
|
|
|
|
|
|
Consolidated statement of changes in equity
For the year ended 31 December
2023
|
|
|
|
|
|
Total
attributable
to owners
of
the
parent
£m
|
Non-controlling
interests
£m
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
-
|
-
|
-
|
(5.7)
|
(5.7)
|
(0.4)
|
(6.1)
|
|
Issue of share capital
|
-
|
0.5
|
22.9
|
-
|
23.4
|
-
|
23.4
|
|
Purchase of own shares for Company
reward scheme
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
|
Tax on Company reward scheme shares
awarded
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
|
Deferred tax on share-based
payments
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
-
|
9.5
|
9.5
|
0.4
|
9.9
|
|
Retirement benefit actuarial
gain
|
-
|
-
|
-
|
0.1
|
0.1
|
-
|
0.1
|
Foreign exchange
differences
|
|
|
|
|
|
|
|
Total comprehensive income for the
year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
-
|
-
|
-
|
(4.4)
|
(4.4)
|
-
|
(4.4)
|
|
Change in non-controlling
interest
|
-
|
-
|
2.0
|
(1.4)
|
0.6
|
(0.7)
|
(0.1)
|
|
Issue of share capital
|
-
|
0.5
|
-
|
-
|
0.5
|
-
|
0.5
|
|
Purchase of own shares for Company
reward scheme
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
-
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
-
|
12.5
|
12.5
|
0.3
|
12.8
|
|
Retirement benefit actuarial
gain
|
-
|
-
|
-
|
1.6
|
1.6
|
-
|
1.6
|
Foreign exchange
differences
|
|
|
|
|
|
|
|
Total comprehensive income for the
year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated cashflow statement
For the year ended 31 December
2023
|
|
|
|
|
Cashflows from operating
activities
|
|
|
|
Profit after tax
|
9.9
|
12.8
|
|
Adjustments for:
|
|
|
|
Financial instruments measured at
fair value: hedging contracts
|
1.2
|
(2.3)
|
|
Share-based payments
|
1.2
|
0.7
|
|
Depreciation of property, plant and
equipment
|
1.9
|
1.4
|
|
Depreciation of right-of-use leased
assets
|
1.3
|
1.1
|
|
Amortisation of acquired intangible
assets
|
11.8
|
8.4
|
|
Amortisation of internally generated
intangible assets
|
0.4
|
0.1
|
|
Interest income
|
(0.3)
|
(0.2)
|
|
Interest expense
|
3.0
|
1.8
|
|
Interest payable on right-of-use
lease liabilities
|
0.4
|
0.2
|
|
Fair value movement on contingent
consideration (note 7)
|
4.0
|
2.6
|
|
Retirement benefit obligation net
finance income
|
(0.1)
|
-
|
|
Contributions to defined benefit
plans
|
-
|
(0.4)
|
|
Tax expense recognised in the
Consolidated statement of comprehensive income
|
3.5
|
3.2
|
|
Increase in inventories
|
(5.1)
|
(4.2)
|
|
Increase in trade and other
receivables
|
(0.3)
|
(3.1)
|
(Decrease)/increase in trade and
other payables
|
|
|
|
Cash generated from
operations
|
31.3
|
24.0
|
|
|
|
|
Net cash from operating
activities
|
|
|
Cashflows from investing
activities
|
|
|
|
Paid on acquisition of
subsidiaries
|
(3.1)
|
(45.0)
|
|
Payment in respect of surplus
working capital
|
(1.2)
|
(17.8)
|
|
Paid in respect of
earn-out
|
(17.5)
|
-
|
Gross cash inherited on
acquisition
|
|
|
|
Acquisition of subsidiaries, net of
cash acquired
|
(20.3)
|
(43.2)
|
|
Purchase of property, plant and
equipment
|
(4.7)
|
(6.4)
|
|
Capitalised development
costs
|
(1.2)
|
(1.5)
|
|
Proceeds on disposal of property,
plant and equipment
|
-
|
0.1
|
|
|
|
|
Net cash used in investing
activities
|
|
|
|
Cashflows from financing
activities
|
|
|
|
Proceeds from issue of share
capital
|
0.5
|
0.3
|
|
Purchase of own shares for Company
reward scheme
|
(0.1)
|
(0.1)
|
|
Tax on shares awarded under Company
scheme
|
(0.1)
|
-
|
|
Finance costs paid
|
(3.0)
|
(1.8)
|
|
Repayments of borrowings*
|
(9.2)
|
(6.5)
|
|
Repayments of right-of-use lease
liabilities
|
(1.6)
|
(1.3)
|
|
Proceeds from bank loans*
|
12.0
|
45.1
|
|
Equity dividends paid
|
(5.7)
|
(4.4)
|
|
Dividends paid to non-controlling
interest
|
(0.4)
|
-
|
Paid on acquisition of
non-controlling interest in subsidiary
|
|
|
Net cash from/(used in) financing
activities
|
|
|
|
Net change in cash and cash
equivalents
|
(7.0)
|
2.3
|
|
Cash and cash equivalents at the
start of the year
|
20.8
|
18.4
|
|
|
|
|
Cash and cash equivalents at the end
of the year
|
|
|
* On 23 May 2022, £15.2 million of
outstanding loans were repaid and £60.3 million was simultaneously
reborrowed as the Group renewed its banking facilities (see Note
6).
Notes to the Final
Results
For the year ended 31 December
2023
1. Earnings per
share
|
|
|
|
|
|
Profit attributable to owners of the
parent
|
|
|
|
|
Adjusted profit
|
|
24.4
|
23.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
adjusted
|
|
|
|
|
Basic
|
|
374.6
|
363.8
|
|
Diluted
|
|
368.5
|
359.0
|
|
Earnings per share -
total
|
|
|
|
|
Basic
|
|
145.8
|
196.1
|
|
|
|
|
|
|
|
|
|
|
|
Issued Ordinary shares at the start
of the year
|
|
6,369,746
|
6,318,415
|
Movement in Ordinary shares during
the year
|
|
|
|
Issued Ordinary shares at the end of
the year
|
|
|
|
|
Weighted average number of shares in
issue
|
|
6,514,028
|
6,342,759
|
Dilutive effect of share
options
|
|
|
|
Weighted average Ordinary shares in
issue on a diluted basis
|
|
|
|
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
year.
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 are
calculated as above whilst substituting total profit for adjusted
profit.
2. Segmental
analysis
For the year ended 31 December
2023
|
|
|
|
|
|
|
Revenue
|
|
72.5
|
63.6
|
-
|
136.1
|
|
|
|
|
|
|
|
|
Adjusted operating profit
|
|
20.8
|
18.6
|
(4.6)
|
34.8
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
|
|
21.6
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
13.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December
2022
|
|
|
|
|
|
|
Revenue
|
|
59.9
|
53.3
|
-
|
113.2
|
|
|
|
|
|
|
|
|
Adjusted operating profit
|
|
18.3
|
15.1
|
(3.3)
|
30.1
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
|
|
18.2
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
16.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Head office items relate to the
Group's head office costs.
Segment assets and
liabilities
|
|
|
|
|
|
|
Assets
|
52.8
|
41.6
|
89.1
|
183.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
2.2
|
2.5
|
-
|
4.7
|
|
Depreciation of property, plant and
equipment
|
1.1
|
0.8
|
-
|
1.9
|
|
Depreciation of right-of-use leased
assets
|
0.9
|
0.4
|
-
|
1.3
|
|
Amortisation of acquired intangible
assets
|
11.1
|
0.7
|
-
|
11.8
|
Amortisation of internally generated
intangible assets
|
|
|
|
|
|
|
|
|
Head
office
£m
(restated)
|
|
|
Assets
|
54.7
|
38.4
|
94.9
|
188.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
0.5
|
5.9
|
-
|
6.4
|
|
Depreciation of property, plant and
equipment
|
0.6
|
0.7
|
0.1
|
1.4
|
|
Depreciation of right-of-use leased
assets
|
0.6
|
0.4
|
0.1
|
1.1
|
|
Amortisation of acquired intangible
assets
|
7.3
|
1.1
|
-
|
8.4
|
Amortisation of internally generated
intangible assets
|
|
|
|
|
Head office items include borrowings,
intangible assets and goodwill arising on acquisition, deferred
tax, defined benefit obligations and parent company net
assets.
2. Segmental analysis
(continued)
Analysis of revenue by geographical
areas
|
|
|
|
|
|
|
Year
to
31
December
2023
£m
|
Year
to
31
December
2022
£m
|
|
Year
to
31
December
2023
£m
|
Year
to
31
December
2022
£m
|
|
UK (domicile)
|
14.7
|
13.3
|
|
117.3
|
118.5
|
|
Rest of Europe
|
33.7
|
32.3
|
|
-
|
-
|
|
North America
|
37.9
|
31.9
|
|
0.8
|
0.7
|
|
China/Hong Kong
|
18.4
|
13.9
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmental revenue is presented on the
basis of the destination of the goods where known, otherwise the
geographical location of customers is utilised.
Analysis of revenue by performance
obligation
|
|
|
|
|
Sale of goods, recognised at a point
in time
|
117.0
|
98.4
|
|
Sale of services, recognised at a
point in time
|
4.3
|
3.7
|
Sale of services, recognised over
time
|
|
|
|
|
|
|
No customer makes up more than 10% of
the Group's revenues.
3. Adjusting
items
|
|
|
|
|
Amortisation of acquired intangible
assets
|
11.8
|
8.4
|
|
Financial instruments measured at
fair value: hedging contracts
|
-
|
(0.1)
|
|
Share-based payments
|
1.2
|
0.7
|
|
Employment taxes arising from
share-based payments
|
-
|
(0.1)
|
|
Acquisition costs (note
7)
|
0.2
|
3.0
|
|
Total adjusting items in operating
profit
|
13.2
|
11.9
|
|
Fair value movement on contingent
consideration (note 7)
|
4.0
|
2.6
|
|
Retirement benefits obligation net
interest income
|
(0.1)
|
-
|
|
Financial instruments measured at
fair value: interest rate swaps
|
1.2
|
(2.2)
|
|
|
|
|
|
|
|
|
Total adjusting items net of
tax
|
|
|
|
Attributable to:
|
|
|
|
Owners of the parent
|
14.9
|
10.6
|
|
|
|
|
|
|
|
|
4. Goodwill
£45.7m of goodwill resides in the Material Sciences segment
(including £34.9m relating to Geotek) (2022: £45.3m) and £9.1m
resides in the Vacuum segment (2022: £8.3m). There are 9 CGU's
within the Material Sciences segment and 10 within the Vacuum
segment. Goodwill is tested annually for impairment by reference to
the value in use of each of the relevant cash-generating units it
is allocated to and aggregated for disclosure purposes into the
respective operating segments. The value in use is calculated on
the basis of projected cashflows for five years together with the
terminal value at the end of the five years, which is computed by
reference to projected year six cashflows and discounted. There was
no requirement for any impairment provision at 31 December 2023
(2022: £nil). The key assumptions in determining the value in use
are:
Revenue and margins: These are
derived from the detailed 2024 budgets which are built up with
reference to markets and product categories with projected 6%
medium term growth factors (2022: 6%). Projected margins reflect
historical performance and the expected impact of efforts to
improve operational efficiency.
Discount rate: Cashflows are
discounted using a pre-tax discount rate of 16.5% (2022: 16.4%) per
annum, calculated by reference to year‑end data on equity values and
interest, dividend and tax rates.
Long-term growth rates: 2.1%
long-term growth rate takes into account both UK and overseas
industry growth expectations (2022: 2.1%).
The long-term growth rate and
discount rate are consistent for all cash-generating units on the
basis that the businesses operate in similar markets and are
exposed to similar risks.
The Directors have considered the
sensitivity of the key assumptions, including the discount rate and
long-term growth rates, and have concluded that any possible
changes that may be reasonably contemplated in these key
assumptions would not result in the value in use falling below the
carrying value of goodwill, given the amount of headroom available,
and the conservative nature of the assumptions.
2022 has been restated to reflect
adjustment to the Geotek acquisition consideration (see note
7).
5. Other intangible
assets
|
|
Internally
generated
development
costs
£m
|
Acquired
distribution
agreements
£m
|
|
Acquired
sales
order
backlog
£m
|
Acquired
brand and
domain
names
£m
|
Acquired
customer
relationships
£m
|
|
|
Gross carrying amount
|
|
|
|
|
|
|
|
|
1 January 2022
|
0.7
|
3.8
|
12.6
|
5.5
|
13.6
|
11.3
|
47.5
|
|
Acquisitions
|
-
|
-
|
22.8
|
5.3
|
1.8
|
16.5
|
46.4
|
|
|
|
|
|
|
|
|
|
|
31 December 2022
|
2.2
|
3.8
|
35.4
|
10.8
|
15.4
|
27.8
|
95.4
|
|
Acquisitions (note 7)
|
-
|
-
|
1.3
|
0.2
|
-
|
0.7
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
|
|
|
1 January 2022
|
-
|
3.7
|
10.6
|
5.5
|
12.7
|
10.0
|
42.5
|
|
|
|
|
|
|
|
|
|
|
31 December 2022
|
0.1
|
3.8
|
13.3
|
7.6
|
13.3
|
12.9
|
51.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount 31 December
2023
|
|
|
|
|
|
|
|
Carrying amount 31 December
2022
|
|
|
|
|
|
|
|
Carrying amount 31 December
2021
|
|
|
|
|
|
|
|
The key assumptions in valuing the
acquired intangible assets of technology and customer relationships
at the date of acquisition are:
Discount rate: Cashflows are
discounted using a pre-tax discount rate ranging between 16% to 17%
per annum. (2022: 15.5%)
Long-term growth rates: 2-2.9%
long-term revenue growth rate takes into account both UK and
overseas markets and 3% cost growth to maintain margin which
broadly aligns with long-term inflation.
Included in the above is Geotek
customer relationships and acquired technology with carrying value
£11.2m and £17.5m respectively.
6. Borrowings
The movement in borrowings over the
year was as follows:
|
|
|
|
|
At 1 January
|
55.6
|
17.0
|
|
Proceeds from drawdown of
loans
|
12.0
|
45.1
|
|
Repayment of loans
|
(9.2)
|
(6.5)
|
|
Interest payable - non
cash
|
3.0
|
1.8
|
|
|
|
|
|
|
|
|
6. Borrowings
(continued)
On 23 May 2022, the Group entered into a new £100m 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 £60m. The initial
consideration for the acquisition of Geotek was financed from this
Facility.
The Facility is for an
aggregate £100m consisting of a £25m term loan
("Term Loan"), a committed £55m revolving credit facility
("RCF") plus a £20m uncommitted accordion facility, which
can be drawn with the agreement of the Banks. The Facility replaced
the Group's previous facilities of which £15.2m was
outstanding at the time of the acquisition of Geotek. The life of
this new Facility is coterminous with the previous facility and
therefore has a term of four 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.
During 2023, loans were drawn down
in order to finance the cash element of the earn-out payable on the
Geotek acquisition (2022: £45.1m net drawn down).
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.
The group was in compliance with the
above covenants throughout the year.
Interest rates are consistent with
the previous facilities, save for an additional rate between 2.5
and 3.0 times gearing. The Banks have a fixed and floating charge
over the Group's UK assets.
The existing lending facilities via
Bordeaux Acquisition Limited ("Bordeaux") were unchanged at the
date of the refinancing. Following Judges' purchase of the
remaining 12% of Bordeaux on 27 June 2022, Bordeaux repaid in full
its outstanding loan of £0.4m on 28 July 2022.
As at 31 December 2023, the Group's
outstanding loans were as follows:
· The
term loan outstanding was £14,062,500 (2022:
£20,312,500);
· The
committed RCF was £44,329,501 drawn (2022: £35,329,501);
and
· The
accordion remained uncommitted and undrawn.
Borrowings mature as
follows:
|
|
|
|
Repayable in less than six
months
|
4.6
|
Repayable in months seven to
twelve
|
|
|
Current portion of long-term
borrowings
|
9.2
|
Repayable in years one to
five
|
|
|
Total borrowings
|
65.1
|
|
Less: interest included
above
|
(6.7)
|
|
Less: cash and cash
equivalents
|
(13.7)
|
|
Add: right-of-use lease
liabilities
|
6.9
|
|
Statutory net debt
|
51.6
|
|
Less: right-of-use lease
liabilities
|
(6.9)
|
|
Add: accrued acquisition
consideration payable in cash
|
0.4
|
|
Adjusted net debt
|
45.1
|
6. Borrowings
(continued)
|
|
|
|
Repayable in less than six
months
|
4.5
|
Repayable in months seven to
twelve
|
|
|
Current portion of long-term
borrowings
|
8.9
|
Repayable in years one to
five
|
|
|
Total borrowings
|
63.6
|
|
Less: interest included
above
|
(8.0)
|
|
Less: cash and cash
equivalents
|
(20.8)
|
|
Add: right-of-use lease
liabilities
|
4.3
|
|
Statutory net debt
|
39.1
|
|
Less: right-of-use lease
liabilities
|
(4.3)
|
|
Add: accrued acquisition
consideration payable in cash
|
17.2
|
|
Adjusted net debt
|
52.0
|
7.
Acquisitions
Acquisition of Geotek Holding
Limited and Geotek Coring Limited
During review of the settlement of
the contingent consideration in the current year, it was identified
that the contingent consideration balance should have been £2.2m
higher at the acquisition date with a corresponding increase in
Goodwill, as the equity share component of the contingent
consideration should have been measured by reference to the fair
value of the Judges share price. This adjustment had no impact on
reported earnings for the year ended 31 December 2022 and had no
impact on net assets at 31 December 2022.
The £35m earn-out on the acquisition
was achieved in full, and was settled in June 2023. 50% (£17.5m) of
the earn-out was satisfied in cash, financed in cash and via the
Group's existing banking facilities (see note 6) and 50% was
satisfied by the issue of 227,863 new Ordinary shares. To reflect
the adjustment in fair value of the contingent consideration, which
includes both unwinding of the discount relating to the cash
liability and increase in the Judges share price between 31
December 2022, and the date of issue of the new Judges shares, a
charge of £4.0m has been recognised in the Consolidated statement
of comprehensive income, within adjusting items (see note 3). The
issue of shares also increased the merger reserve by
£22.9m.
Acquisition of Henniker Scientific
Limited
On 3 April 2023, Judges Scientific
acquired 100% of the entire issued share capital of Henniker
Scientific Limited ("Henniker"), a leading supplier of instruments,
systems & technologies for plasma and surface science
applications, supplying solutions for cleaning, surface activation
to improve adhesion, and functional nano-scale coatings.
The purchase price of Henniker
consists of:
• The initial
consideration, paid in cash at completion, of £1.85m.
• Contingent
consideration up to a maximum of £0.46m to be satisfied in
cash.
• The contingent
consideration becomes payable on achievement of a minimum adjusted
EBIT of £0.46m for the year to 31 March 2024 increasing pro rata on
a 4:1 ratio until it reaches a cap when an adjusted EBIT of £0.58m
is achieved.
• An additional
payment for excess cash (surplus working capital) at completion
over and above the ongoing requirements of the business, expected
to be covered by the cash inherited at completion.
7. Acquisitions
(continued)
The summary provisional fair value of
the cost of this acquisition includes the components stated
below:
|
|
|
|
|
|
|
Initial cash
consideration
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross cash inherited on
acquisition
|
1.3
|
|
|
|
Cash retained in the
business
|
|
|
|
|
Payment in respect of surplus
working capital
|
|
|
|
|
|
|
|
|
|
Acquisition-related transaction
costs charged to the Consolidated statement of comprehensive
income
|
|
|
The payment in respect of surplus
working capital was settled in July 2023.
Henniker has an accounting reference
date of 31 March, which is not coterminous with the Group's
accounting reference date. Following completion of the earn-out
period, the accounting reference date will be aligned with the
Group.
Acquisition of Bossa Nova
Vision
On 2 May 2023, Judges Scientific's
subsidiary, Dia-Stron Inc., acquired 100% of the entire issued
share capital of Bossa Nova Vision LLC ("BNV"), a company
specialising in imaging measurement technology for the cosmetics
industry based in Los Angeles, California, USA.
The consideration for BNV was $1.6m
(£1.3m) in cash, which was paid in May 2023.
Acquisition-related transaction
costs charged to the Consolidated Statement of Comprehensive Income
amounted to £0.1m.
The summary provisional fair values
recognised for the assets and liabilities acquired from the two
acquisitions during the period are as follows:
|
|
|
Fair
value
adjustments
£m
|
|
|
Intangible assets
|
-
|
2.2
|
2.2
|
|
Inventories
|
0.2
|
-
|
0.2
|
|
Trade and other
receivables
|
0.4
|
-
|
0.4
|
|
Cash and cash equivalents
|
1.5
|
-
|
1.5
|
|
|
|
|
|
|
Deferred tax liabilities
|
-
|
(0.5)
|
(0.5)
|
|
Trade payables
|
(0.1)
|
-
|
(0.1)
|
|
Current tax liability
|
(0.1)
|
-
|
(0.1)
|
|
|
|
|
|
Net identifiable assets and
liabilities
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|
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The intangible assets recognised
reflect acquired customer relationships, the value of the acquired
future committed order book, together with the acquired technology.
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. £0.4m of goodwill has
been allocated to the Materials Sciences segment in relation to the
acquisition of BNV and £0.8m of goodwill has been recognised within
the Vacuum segment in relation to Henniker. The intangible assets
total is split between Henniker (£1.4m) and BNV (£0.8m).
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.
7. Acquisitions
(continued)
These acquisitions resulted in
revenue of £2.4m and a profit after tax (before adjusting items)
attributable to owners of the parent company of £0.3m in the period
post-acquisition. After amortisation of intangible assets, the
contribution to owners of the parent company's results amounted to
a loss of £0.1m after tax.
If these acquisitions had completed
on 1 January 2023, revenue for the Group for the year ended 31
December 2023 would have increased by a further £0.9m and profit
after tax (before adjusting items) attributable to the owners of
the parent company would have increased by a further £0.1m. After
amortisation of intangible assets, the contribution to owners of
the parent company's results would have amounted to a loss of £0.3m
after tax.
Acquisition of Luciol Instruments SA
(post balance sheet event)
Post year-end, on 1 February 2024,
the Group's subsidiary PE.fiberoptics acquired 100% of the shares
of Luciol Instruments SA ("Luciol") for an initial cash
consideration of CHF 2m plus a potential earn-out capped at CHF
0.5m. Due to the timing of this acquisition, full disclosures have
not been provided, including fair value of acquired assets and
liabilities. A payment in respect of surplus working capital
totalling CHF 0.7m was made in February 2024, covered by the
business's existing cash resources.
All acquisitions were made in line
with group strategy.
8. Dividends
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Final dividend for the previous
year
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59.0
|
3.9
|
|
47.0
|
3.0
|
Interim dividend for the current
year
|
|
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|
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Total final and interim
dividend
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The Directors will propose a final
dividend of 68p per share, amounting to £4.8m, for payment on 7
July 2024. As the final dividend remains conditional on
shareholders' approval at the Annual General Meeting, provision has
not been made for this dividend in these consolidated financial
statements.
9. 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 was payable at the same
time and in the same proportion as the payments of the initial
consideration and the Earn-out to the sellers. Following settlement
of the Earn-out in June 2023, Mr Holroyd elected to receive one
half of his fee of £0.4m in new Ordinary shares and the other half
in cash to enable him to settle the related tax payable. (2022:
£0.4m was paid to Mr Holroyd in respect of the completion of the
purchase of Geotek).
10. Final Results
Announcement
This final results announcement,
which has been agreed with the auditors, was approved by the Board
of Directors on 20 March 2024. It is not the Group's statutory
accounts. Copies of the Group's audited statutory accounts for the
year ended 31 December 2023 will be available at the Company's
website, www.judges.uk.com,
promptly after the release of this preliminary announcement and a
printed version will be dispatched to shareholders shortly. Copies
will also be available to the public at the Company's Registered
Office at 52c Borough High Street, London SE1
1XN.
The auditor has reported on
those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention to by way of emphasis without qualifying their
report, and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006. The consolidated financial
statements of the Company have been prepared in accordance with
international accounting standards in conformity with
the requirements of the Companies Act 2006. The statutory
accounts for the year ended 31 December 2022 have been delivered to
the Registrar of Companies, but the 31 December 2023 accounts have
not yet been filed.