Interim Results

Judges Scientific plc

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

Interim results for the six months ended 30 June 2024

Subdued organic trading; three acquisitions completed and

10% 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 2024. 

Key financials

Other financial highlights

·      Subdued trading across the Group set against a backdrop of difficult market conditions and record prior year comparatives.

·      Organic** revenue decreased 3% against H1 2023.

·      Organic** order intake down 4% compared with H1 2022.

·      Organic** order book at 17.2 weeks (H1 2023: 22.4 weeks).

Strategic highlights:

·      Completion of two small acquisitions: Luciol and Rockwash for a combined consideration of £4m plus maximum earn-out of up to £4.2m plus excess cash.

Post period highlights:

·      Completion of Magsputter acquisition for £12.3m plus excess cash.

·      Extension and increase of our banking facility to £140m including £50m accordion.

·      New Geotek coring contract for an early 2025 expedition.

·      Strengthening of Judges Executive team following the recruitment of Dr Ian Wilcock as Group Commercial Director.

Outlook

·      Stronger second half expected for the Group.

·      Some recovery in order intake in first few months of H2, including 2025 coring contract.

·      No change to existing guidance for the full year, but continued challenging market conditions and short-term vulnerability to the timing of orders and revenue.

* 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 2023.

*** Restatement amends statutory comparative figures only. See note 13 for further details.

Alex Hambro, Chairman of Judges Scientific, commented:  

"As announced already, several of our Group businesses have experienced a challenging first half, driven by difficult market conditions and the deferral of some projects into H2 or 2025.

In spite of the trading disappointment, the Group has again demonstrated its resilience and its financial strength.  With the completion of three acquisitions since the start of the year, the further strengthening of our management team, and a 10% increase to the interim dividend, we continue to build on our model of delivering long-term shareholder value." 

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 2024, on 19 September at 16:30 UK time. Investors can register for the webinar here: https://bit.ly/JDG_H124_results_webinar

For further information please contact: 

Notes to editors:

Judges Scientific plc (AIM: JDG), is a group focused on acquiring and developing companies in the scientific instrument sector.  The Group now consists of 25 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 

Trading in the first half of 2024, as already announced, has been subdued against a backdrop of difficult market conditions and versus record prior year comparatives. The challenging environment has impacted trading across our Group, with a general softening of order intake and the deferral of some projects into the second half of the current year or until 2025. 

Despite unfavourable trading conditions, the Group has continued to execute its strategy, and completed two small acquisitions in the first six months: PE Fiberoptics acquired Luciol Instruments SA and Geotek acquired Rockwash Geodata Limited. These deals were followed by the post-period acquisition of Magsputter Limited, and the appointment of Dr Ian Wilcock to the Board as Group Commercial Director, reinforcing the strength of Judges' executive team.

Order intake 

Organic* order intake was down 4% against the first half of 2023. This was a strong comparative prior period as orders had climbed 14%, supported by the emergence of China from repeated lockdowns.

Organic intake was subdued in most of our trading regions, particularly in China/Hong Kong, which decreased by 65%, bringing it back to two thirds of its 2022 level; North America was down 7%. The UK fared better, ahead by 8%, with Europe up by 2%; the Rest of the World increased by 31%. The best absolute performances were Singapore (its progress equalled a third of the China/Hong Kong decline), Germany, Angola, Brazil, Australia, Canada and the Czech Republic. The weakest absolute performances were recorded in China/Hong Kong, the US, Pakistan, Poland, Malaysia and Japan.

The Organic order book was maintained at 17.2 weeks from its year-end position (31 December 2023: 17.0 weeks; 30 June 2023: 22.4 weeks). This reflects the resolution of the supply chain issues. The second half of 2023 saw the final catch up of deliveries, and the stability in the first half suggests that progress in sales must now be driven by improved order intake rather than order book compression.

Revenues 

Total Group revenues were down 1% at £60.8m (H1 2023: £61.3m) and included contributions from the recently acquired Henniker, Bossa Nova and Luciol.

As order intake became the main driver of revenues again, during the first half some businesses made excellent progress with intake, some businesses maintained revenues despite a lack of order intake, while others suffered reduced sales due to weak demand. Of those businesses seeing weakened demand, most hold significant trading relations with China. Another feature of the period has been the postponement of some projects to the second half of 2024 or into 2025.

Organic revenues declined 3% to £58.8m (H1 2023: £60.6m). The only region to progress was the Rest of Europe, up by 3%. The UK was marginally down by 1%, North America declined by 4%, the Rest of the World by 7% and China/Hong Kong by 9%. The best absolute performance was seen in the Czech Republic, Belgium, India and Malaysia, while the worst absolute performances were in Brazil, Sweden, Australia and China/Hong Kong.

As previously announced, Geotek's performance was weaker than H1 2023, which had included some residual income from its 2022 coring expedition. The positive extension of existing, and entry into new, digitalisation contracts occurred too late to impact the H1 results meaningfully.

Profits 

Profitability was affected by the reduced revenues amplified by the high fixed cost base of the Group's operations. Adjusted operating profit receded 13% to £12.3m (H1 2023: £14.2m) and Adjusted pre-tax profit 16% to £10.8m (H1 2023: £12.8m). The EBITA contribution of the Organic businesses declined 14% versus H1 2023.

Return on Total Invested Capital ("ROTIC") reduced to 20.7% against 22.8% for the trailing 12 months ended 30 June 2023. 

Adjusted basic earnings per share decreased by 19% to 123.7p (H1 2023: 152.8p) and Adjusted diluted earnings per share reduced similarly to 121.6p from 150.3p. Adjusted Earnings per share were still affected for half of the period by the increase in UK corporation tax rates to 25%.

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 pre-tax adjustments of £5.0m (H1 2023: £9.8m restated) consists primarily of a £4.2m charge for amortisation (H1 2023: £6.1m) of acquired intangible assets arising through acquisition. These adjusting items reduce profit before tax from £10.8m to £5.8m (H1 2023: £12.8 to £3.0m restated) and result in earnings per share of 63.3p basic and 62.3p diluted (H1 2023: 15.6p per share basic and 15.3p per share diluted). 

Corporate activity

On 1 February 2024, the Group acquired 100% of the share capital of Luciol Instruments SA ("Luciol"), a company specialising in instruments to test fibreoptics, based in Mies, Vd, Switzerland. The initial consideration was CHF 2.0m paid in cash on completion plus excess cash. A cash earn-out capped at CHF 0.5m will be paid if and to the extent that Luciol exceeds an average EBIT of CHF 0.5m in the four years ending on 31 December 2024 or 2025 at a multiple of four times the excess.

On 27 June 2024, the Group acquired 100% of the share capital of Rockwash Geodata Ltd ("Rockwash"), a Llandudno based company specialising in rock cuttings and chippings digitalisation, for an initial cash consideration of £2.25m plus excess cash plus an earnout capped at £3.75m. The earnout will be paid if and to the extent that Rockwash exceeds an EBIT of £0.375m in 2024 or 2025 at a multiple of six times the excess.

Cashflow and net debt 

Group cash flow was disappointing as a legacy of the recent supply issues.

Cash generated from operations amounted to £7.8m (H1 2023: £11.5m) representing 63% of Adjusted operating profit (H1 2023: 81%). Cash conversion is an essential element of our business model and restoring it to the pre-Covid levels is a priority.

The interim balance sheet includes cash balances of £6.9m; the increased flexibility of our debt facility reduces the requirement to hold large cash balances. Adjusted net debt grew to £52.3m from the beginning of 2024 (31 December 2023: £45.2m); £7m related to acquisitions and £3m on capex.

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 29.7p (2023: 27p), which will be paid on Friday 8 November 2024 to shareholders on the register on Friday 11 October 2024.  The shares will go ex-dividend on Thursday 10 October 2024.  The interim dividend is covered 4.2 times by Adjusted earnings (2023: 5.7 times). 

Post balance sheet events

Post period-end, the Group has made further strategic progress, highlighting the resilience of the Group's business model.

On 1 July 2024, the Group amended and extended its multi-bank facility, which now amounts to £140m (including a £50m accordion), compared with £100m (including a £20m accordion). The facility was extended by two years and now expires on 1 July 2028, adding increased capability to the Group's deal-making capacity.

On 15 August 2024, the Group acquired 100% of the shares of Magsputter Limited, the holding company of Teer Coatings Limited, a company manufacturing top-of-the-range physical vapour deposition instruments and providing specialised coating services. The consideration was £12.3m (excluding excess cash), equal to six times adjusted EBIT for the year ended 31 January 2024 of £1.74m, plus the independent valuation of the property. The Board expects the Acquisition to be immediately earnings enhancing.

On 28 August 2024, Geotek signed a binding contract for its next coring expedition; this expedition will take place in the first half of 2025 and the revenue arising from this contract will be of a similar magnitude to recent coring contracts.

On 2 September 2024, we were pleased to welcome Dr Ian Wilcock to the Board as Group Commercial Director, further reinforcing the executive team. Ian is experienced in successfully leading divisions in large scientific groups and will join Mark Lavelle and Dr Tim Prestidge in the pursuit of excellence at our businesses.

The World is still in a very nervous place, a trend that is not ideal for the scientific community which thrives on free exchange and a cosmopolitan atmosphere. Our sector is also sensitive to efforts to control sovereign debt and the potential impact on research spending. More positively, exchange rates have remained favourable to our export driven business.

Your Board expects the second half to show significant improvement, with several agreements signed too late to impact the first half but contributing to the second. With the signature of a 2025 coring contract, our order intake is now 3% ahead of YTD 2023. The Board is not revising its current guidance for the full year performance, but remains mindful of the challenging market conditions and current short-term vulnerability to the timing of orders and revenue.

In spite of the trading disappointment in the first half, the Group has again demonstrated its resilience and its financial strength with the completion of three acquisitions since the start of the year and a 10% increase to the interim dividend, thus continuing to build on our model of delivering long-term shareholder value.

The Hon. Alexander Hambro

Chairman

19 September 2024

Condensed consolidated interim statement of comprehensive income

 The statement of comprehensive income for the period to 30 June 2023 was restated for adjustment to the measurement of the fair value of the contingent consideration recognised in the Geotek acquisition to align with an amendment recorded in the 2023 Annual Report and Accounts. See note 13 for further details.

Condensed consolidated interim balance sheet

The 30 June 2023 balance sheet has been restated to adjust the initial goodwill and equity component of contingent consideration payable which was recognised in the Geotek acquisition to align with an amendment recorded in the 2023 Annual Report and Accounts. See note 13 for further details.

Condensed consolidated interim statement of changes in equity

The statement of comprehensive income for the period to 30 June 2023 was restated for adjustment to the measurement of the fair value of the contingent consideration recognised in the Geotek acquisition to align with an amendment recorded in the 2023 Annual Report and Accounts. See note 13 for further details.

Condensed consolidated interim cashflow statement

The Condensed consolidated interim cashflow statement for the period to 30 June 2023 was restated for adjustment to the measurement of the fair value of the contingent consideration recognised in the Geotek acquisition to align with an amendment recorded in the 2023 Annual Report and Accounts. See note 13 for further details.

Notes to the interim results

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 financial information set out in this Interim Report for the six months ended 30 June 2024 and the comparative figures for the six months ended 30 June 2023 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 2023, 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 2023 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 2023 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 18 September 2024.

Going concern

The consolidated financial statements have been prepared on a going concern basis. The Group ended the first half of 2024 with adjusted net debt of £52.3m compared to adjusted net debt of £45.1m at 31 December 2023, after paying £4.2m in cash in respect of the Luciol and Rockwash acquisitions (see note 9). The Group uses adjusted net debt rather than statutory net debt for this comparison, as this figure includes actual cash liabilities arising from acquisitions. The increase in net debt resulted from the aforementioned acquisitions and their corresponding expected earnout payments, payment of our fair share of tax (£1.5m) and ongoing investment into capital expenditure (including property refurbishment) for the businesses (£3.0m) partially offset by cash generation.

The Directors have considered the potential ongoing impact of the heightened political tensions globally and of continuing higher levels of interest rates and inflation. The Group is in a strong financial position with solid cash balances, low gearing and a robust 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 2024 as happened after the first outbreak of Covid-19 in 2020, 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 2023, 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

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

Segment assets and liabilities

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

4. Adjusting items

5. Earnings per share

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:

7. Other intangible assets

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