TIDMJDG
RNS Number : 9977Z
Judges Scientific PLC
21 March 2017
21 March 2017
Judges Scientific plc
("Judges Scientific", "Judges", the "Company" or the
"Group")
PRELIMINARY STATEMENT OF RESULTS
Judges Scientific, a group involved in the buy and build of
scientific instrument businesses, is pleased to announce its
Preliminary Results for the year ended 31 December 2016.
Highlights:
-- Revenues up 2% to a record GBP57.3 million (2015: GBP56.2
million), including 2.5% organic growth;
-- A record four acquisitions completed during the year:
CoolLED, Dia-Stron, Fire Instrumentation and Research Equipment
("FIRE") and EWB Solutions for GBP9.0 million;
-- Final dividend of 18.5p, making a total 27.5p for the year,
an increase of 10%; covered 3.1 times by adjusted earnings;
-- Adjusted* operating profit of GBP7.1 million (2015: GBP9.3 million);
-- Statutory operating profit of GBP1.0 million (2015: GBP1.8 million);
-- Organic order intake up 2.9% compared with 2015;
-- Organic order book at 14.7 weeks (1 January 2016: 11.4 weeks);
-- Adjusted* basic earnings per share 84.8p (2015: 109.2p);
-- Cash generated from operations of GBP6.2 million (2015: GBP8.5 million);
-- Adjusted* net debt of GBP9.9 million as at 31 December 2016
(31 December 2015: GBP4.0 million);
-- Cash balances of GBP7.9 million as at 31 December 2016 (31 December 2015: GBP8.5 million).
* Adjusted earnings figures are stated before adjusting items
relating to amortisation of 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 subordinated debt owed
by subsidiaries to minority shareholders.
Alex Hambro, Chairman of Judges Scientific, commented:
"Although 2016 was a year of contrasts for Judges with the
completion of a record four acquisitions but a disappointing
trading performance, Judges commences 2017 with a solid financial
position, four new businesses, a strong order book and positive
order intake since the start of the year, all of which provides a
platform for a year of progress."
For further information please
contact:
Judges Scientific plc Tel: 020 3829 6970
David Cicurel, CEO
Brad Ormsby, FD
Shore Capital (Nominated Adviser Tel: 020 7408 4090
& Broker)
Stephane Auton
Edward Mansfield
Abchurch (Financial Public Tel: 020 7398 7700
Relations)
Julian Bosdet
Tim Thompson
Rebecca Clube
Notes to editors:
Judges Scientific plc (AIM: JDG), is a group involved in the buy
and build of scientific instrument businesses. The Group currently
consists of 15 businesses acquired since it was first admitted to
AIM in 2003.
The acquired companies are primarily UK-based with products sold
worldwide to a diverse range of markets including: higher education
institutions, the scientific communities, manufacturers and
regulatory authorities. The UK is a recognised centre of excellence
for scientific instruments. The Group holds 5 Queens' awards for
innovation and export.
Judges Scientific maintains a policy to selectively acquire
businesses that generate sustainable profits and cash. Shareholder
returns are created through the repayment of debt, organic growth
and dividends.
The Group's companies predominantly operate in niche end
markets, with long term growth fundamentals and resilient
margins.
For further information, please visit www.judges.uk.com
CHAIRMAN'S STATEMENT
2016 was a year of contrasts for Judges. A record of four
acquisitions were completed but the overall trading performance of
the Group was disappointing. The Group currently consists of 13
trading businesses; the excellent progress of five of our organic
businesses and the contribution of the newly acquired ones only
partially compensated for the underperformance of three of the
Group's businesses. The Group as a whole achieved modest revenue
growth in 2016 to a new record of GBP57.3 million (2015: GBP56.2
million).
While the long-term growth drivers of the scientific
instrumentation sector remain excellent, the volatile demand
observed in the previous three to four years has continued to be a
feature of our business; weak demand throughout the Group in the
first half gave way to a good recovery and a strong order book by
the year-end of 13.9 weeks (31 December 2015: 11.4 weeks).
Acquisitions
The year under review saw the completion of the acquisitions
of:
-- 100% of the issued share capital of CoolLED Limited
("CoolLED") on 18 February 2016 for a total consideration of GBP3.6
million (including an earn out payment of GBP0.1 million) plus
excess cash. CoolLED designs, manufactures and markets illumination
systems for fluorescence microscopy, which is a technique used in
life sciences;
-- the business and assets of Fire Instrumentation &
Research Equipment ("FIRE") on 29 March 2016. This business
manufactures instruments which test reaction to fire and has been
integrated into Fire Testing Technologies;
-- 100% of the issued share capital of Dia-Stron Limited
("Dia-Stron") on 1 April 2016 for a total consideration of GBP2.7
million plus excess cash. The company designs, manufactures and
sells systems to test the mechanical properties of fibres; and
-- 100% of the issued share capital of EWB Solutions Limited
("EWB") on 29 November 2016 for GBP1.8 million plus excess cash.
The company manufactures edge-welded bellows used in Ultra High
Vacuum systems and other scientific, medical and defence
applications.
I am pleased to report that these new additions to the Group
have performed well and further diversified our revenue streams and
mitigated our risk profile.
Performance
Group revenues increased from GBP56.2 million to GBP57.3
million. This included organic growth of 2.5% and the 2016
acquisitions, offset to a degree by lower sales at Armfield.
Adjusted operating profits reduced from GBP9.3 million in 2015 to
GBP7.1 million. Statutory operating profit was GBP1.0 million
(2015: GBP1.8 million).
Despite a disappointing trading performance, the Group's
financial position remains strong and the Board recommends a final
dividend of 18.5p, making a total of 27.5p in respect of 2016
(2015: 25.0p), representing a 10.0% increase.
Strategy
The Group's strategy is based on creating shareholder returns
through highly selective and carefully structured acquisitions,
underpinned by diversified, solid and consistent earnings and
cashflows arising from our acquired businesses.
The Group's acquisition model is to acquire small/medium-sized
scientific instrument companies, paying a disciplined multiple of
earnings and to finance any acquisition ideally through existing
cash resources and/or bank borrowings. We are highly selective in
acquiring businesses with long-term sustainable profits and
cashflows, in order 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 longstanding strength. As our Group grows it is
then able to promptly pay down the acquisition debt, making space
to reinvest in further acquisitions, subject to our prudent
approach on gearing.
The underlying market for scientific instruments remains robust
and the sector's long-term growth drivers provide comfort that the
Group will continue to deliver strong and durable returns for
shareholders despite, as we have seen this year, the potential for
some short-term variability in performance. Long-term market
drivers are rooted in the general global expansion of higher
education and the need for improved measurement to support the
relentless worldwide search for optimisation across science and
industry.
Our team
The Group has highly specialised and skilled employees who
constantly strive to improve and perfect their products and
services in a rapidly changing technical world. Their intimate
knowledge of their niche markets and customers, most of which are
international to the UK, has allowed your Company to weather some
changeable economic circumstances over the past few years and we
are fortunate to benefit from their dedication and sheer hard work.
Our thanks go out to them and to all our stakeholders for their
continued and important contributions to the achievements reported
during the year.
Alex Hambro
Chairman
20 March 2017
CHIEF EXECUTIVE'S REPORT
Group revenues for the financial year ended 31 December 2016
progressed modestly from GBP56.2 million to GBP57.3 million, an
increase of 2%. This reflects organic growth of 2.5%, and the
contribution of the four businesses acquired during 2016 and the
full-year albeit reduced contribution from Armfield (2015: 11
months). For the year as a whole and excluding the businesses
acquired since 1 January 2015 (this is the meaning of "organic" in
this Report and Accounts), revenues declined 14% in the UK, 14% in
the rest of Europe and 5% in China/Hong Kong but North America was
strong, with USA/Canada up 34%.
Profit before tax and adjusting items receded to GBP6.6 million
(2015: GBP8.8 million). Organic operating contribution was down
19.8% due to the underperformance of two businesses in the Group's
Vacuum division; one was impacted by a reduction in demand from end
customers in its niche, whilst the other suffered production and
supply chain issues. Five organic businesses made excellent
progress and increased the amount of their contribution by 29% but
this only partially compensated the shortfall at the two organic
underperformers. All operating subsidiaries combined (including
Armfield and the 2016 acquisitions) produced a Return on Total
Invested Capital of 15.2% (2015: 24.1%).
Basic earnings per share before adjusting items decreased by
22.3% to 84.8p from 109.2p, while fully diluted earnings per share
before adjusting items declined 22.0% to 83.7p (2015: 107.3p).
For the third consecutive year, order intake started slowly and,
in 2016, it only began to improve in June. The recovery was
particularly strong in the third quarter and organic intake
finished up 2.9% for the full year. Armfield also had a poor start
and a strong third quarter but was behind last year in the fourth
quarter and well behind for the year as a whole. Order intake in
the newly acquired subsidiaries was in line with Judges'
expectations. The organic order book grew from 11.4 weeks, as at 1
January 2016, to 14.7 weeks as at 31 December 2016; total order
book at the year-end reached 13.9 weeks.
The trading issues experienced during 2016 impacted cashflow.
Cash generated from operations, which amounted to GBP6.2 million
(2015: GBP8.5 million), was also affected by the production
problems mentioned previously. Adjusted net debt as at 31 December
2016, excluding subordinated debt owed to non-controlling
shareholders and including sums still due in respect of an
acquisition, amounted to GBP9.9 million (2015: GBP4.0 million); the
main contribution to the increase is the GBP9.0 million spent on
acquisitions. Year-end cash balances totalled GBP7.9 million (2015:
GBP8.5 million).
Dividends
The Company is returning to the practice of paying only one
interim dividend. Your Board is recommending a final dividend of
18.5p per share which, subject to approval at the forthcoming
Annual General Meeting on 24 May 2017, will make a total
distribution of 27.5p per share in respect of 2016 (2015: 25.0p per
share). Despite the proposed 10.0% increase, the total dividend is
covered over three times by adjusted earnings per share.
The proposed final dividend will be payable on 7 July 2017 to
shareholders on the register on 9 June 2017 and the shares will go
ex-dividend on 8 June 2017.
The Company's shareholders are reminded that a Dividend
Reinvestment Plan (DRIP) is in place to enable shareholders to
automatically reinvest their dividends in new Judges shares should
they so wish.
Trading environment
The long-term fundamentals supporting demand for scientific
instruments remain positive. Market demand is being driven
primarily by increased worldwide investment in higher education and
a growing trend towards optimisation across science and industry;
optimisation requires measurement.
Despite these positive long-term trends, the markets across
which Judges and its peers operate are characterised by a degree of
shorter-term variability, influenced mostly by government spending,
currency fluctuations and the business climate in major trading
blocs, particularly the USA and China. In smaller territories,
year-on-year comparisons can be somewhat meaningless, partly due to
the high value of some individual orders and the long gestation
period often occurring before purchasing intentions crystallise
into orders and sales.
As a large percentage of the Group's sales are overseas,
exchange rates have a significant influence on the Group's
business: Judges' manufacturing costs are largely denominated in
Sterling and most of its revenue originates from countries where
the standard of value is the Euro (one-third of total revenue) or
the US Dollar (half of total revenue). The currency movements in
the run-up to the Brexit vote and since have had a positive
influence (mitigated to an extent by hedging) on our margins or our
competitiveness. Current exchange rates are the most favourable we
have seen since 2009.
We are always seeking to maintain and develop market share
through the creation of new and improved products. This is
evidenced by our significant investment in research and
development. Your Group's investment towards achieving these goals
increased to GBP3.8 million during 2016, equivalent to 6.6% of
Group revenue (2015: GBP3.0 million; 5.4%). We have budgeted to
maintain this level of investment in 2017 reflecting the importance
we place in providing our customers with innovative,
state-of-the-art, products.
Acquisitions
As a buy and build group, the acquisition of new businesses is a
fundamental feature of our strategy. Executing this effectively is
required to ensure that long-term value is generated for
shareholders. In 2016 we acquired four businesses: CoolLED in
February, FIRE in March, Dia-Stron in April and EWB Solutions in
November.
The industry in which we operate consists of a multitude of
small global niches as highlighted by the diverse nature of the new
entrants to our Group. The UK is recognised as a centre of
excellence for product innovation and manufacturing with
world-leading businesses in this arena. Our Group has built a
reputation over the past decade as a worthwhile 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.
Consequently, we continue to see many opportunities; affording us a
high degree of selectivity.
CoolLED
CoolLED specialises in the design, manufacture and marketing of
LED illumination systems for fluorescence microscopy and is based
in Andover, Hampshire. The purchase consideration included an
initial GBP3.5 million cash payment, a payment reflecting excess
cash at completion and a potential GBP1.0 million earn-out payable
to the extent that adjusted EBIT for the financial year ended 30
June 2016 exceeded GBP0.78 million. In line with the Board's
expectations at completion GBP0.1 million was paid to settle the
earn-out in August 2016. The trailing twelve months adjusted
operating profit for CoolLED to 30 September 2015 was GBP0.75
million arising from GBP2.8 million of revenue. The GBP3.5 million
paid at completion was drawn from the Group's acquisition
facility.
CoolLED's innovative products have proven their value to
researchers as high quality LED lighting sources which are
progressively replacing outdated mercury lamps. It has grown
strongly over the past few years and Scientifica, one of our
subsidiaries and a major customer, believe their products are the
best available.
FIRE
Our subsidiary, Fire Testing Technology ("FTT") acquired the
business and certain assets of FIRE, which manufactures products
similar in nature to FTT. Post-acquisition, FIRE has been
integrated into FTT's operations.
Dia-Stron
Dia-Stron, which is based in Andover, Hampshire and with a sales
office in the USA, manufactures systems to test the mechanical
properties of fibres. Their instruments are predominantly used in
the testing of human hair, where approximately 75% of its sales are
achieved and they are the world leader. The balance comprises
industrial fibres, skin testing instruments and contract testing
for third parties. The company was acquired for a cash
consideration of GBP2.7 million plus a separate payment to reflect
excess cash at completion. Dia-Stron's adjusted operating profits
for the 12-month period ended 30 August 2015 totalled GBP0.66
million on sales of GBP1.67m. This acquisition was financed from
existing cash resources.
EWB
EWB is a company based in Hemel Hempstead, Hertfordshire, that
manufactures edge-welded bellows used in Ultra High Vacuum ("UHV")
systems and various other applications. EWB was acquired for a cash
consideration of GBP1.76 million plus a payment to reflect excess
cash at completion. The company's adjusted operating profit for the
year ended 30 April 2016 was GBP0.5 million and its average
adjusted operating profit for the five years ended on 30 April 2016
was GBP0.44 million. The acquisition was financed partly from the
Judges acquisition facility and partly from existing cash
resources.
The majority of EWB's products are bespoke but repetitive and
sold directly to original equipment manufacturers ("OEMs") for
integration into UHV systems; these provide high tech surface
analysis and processing techniques, for use in semi-conductor
manufacturing, nanotechnology, nuclear science and general
research. Other applications include aerospace, medical and
industrial devices. The acquisition reinforces the Group's
pre-eminent position in the UHV field.
Current trading and prospects
2017 has commenced in a positive fashion with overall order
intake for the first ten weeks of the year in line with our yearly
budget, and organic order intake substantially ahead of the same
period at the start of 2016. This continues the momentum of order
intake experienced in the second half of 2016. This early start to
2017 is in contrast to the weak beginning observed in the previous
three years.
Since the year-end we have taken further steps to address the
production challenges in one of our businesses. However we expect
that these actions will take some time before bearing fruit.
As a business which exports a significant amount of its output,
we are benefitting from the weakness in Sterling resulting from the
Brexit vote and we are now enjoying the most favourable foreign
exchange environment since 2009. In spite of the continuing
influence of some of the difficulties experienced in 2016, Judges
commences 2017 with a solid financial position, four new
businesses, a strong order book and positive order intake since the
start of the year, all of which provides a platform for a year of
progress.
David Cicurel
Chief Executive
20 March 2017
FINANCE DIRECTOR'S REPORT
The Group's strategy is based on the acquisition of companies
operating in the scientific instruments sector and the continuing
generation of profitable performance at its existing subsidiary
businesses.
The Group's Key Performance Indicators, which are aligned with
the ability to repay acquisition debt and fund dividend payments to
shareholders, are earnings per share, return on capital and
cashflow generation. All three KPIs have suffered as a result of
the underperformance of three of our businesses this year.
Revenue
Group revenues only rose 2.0% by GBP1.1 million to GBP57.3
million (2015: GBP56.2 million). These revenues included organic
sales growth of 2.5% in the year (2015: 4.9%), which was a mixture
of strong performance at five of our businesses partially offset by
weak performance at two others. The benefits of revenues from our
new acquisitions were counterbalanced by weak performance at
Armfield in 2016. Armfield will be measured as part of the organic
businesses in 2017.
The Materials Sciences segment revenues remained stable at
GBP28.2 million (2015: GBP28.3 million) and Vacuum revenues
increased by 4.5% to GBP29.1 million compared to GBP27.9 million in
2015. Within the Material Sciences segment, poor performance at
Armfield offset good organic performance and revenue from new
acquisitions. The growth in Vacuum revenues is attributable to new
acquisitions partially offset by sluggish organic sales.
Profits
2016's adjusted operating profits decreased by GBP2.2 million to
GBP7.1 million (2015: GBP9.3 million). This decrease of 22.8%
reflects the weak performance at three of our businesses, which
more than offset the benefit from our new acquisitions and the good
performance at five of our other businesses. Adjusted operating
margins consequently reduced to 12.5% (2015: 16.5%) particularly
impacted by the production issues at one of our businesses.
Adjusted profit before tax was GBP6.6 million compared to GBP8.8
million in 2015.
Statutory operating profit reduced by GBP0.8 million to GBP1.0
million (2015: GBP1.8 million), and statutory profit before tax was
GBP0.4 million compared to GBP1.3 million in 2015.
Adjusting items
Total adjusting items recorded in 2016 were GBP6.2 million
compared to GBP7.5 million in 2015. Amortisation of intangible
assets recognised upon acquisition, as required under IFRS,
totalled GBP5.2 million compared to GBP6.7 million in 2015 and
acquisition costs increased by GBP0.2 million to GBP0.7 million
(2015: GBP0.5 million) as a consequence of the increased number of
completed acquisitions this past year.
Finance costs
Net finance costs (excluding adjusting items) totalled GBP0.5
million (2015: GBP0.5 million). Statutory net finance costs were
GBP0.6 million, the difference due to the GBP0.1 million net
finance cost of the defined benefit pension scheme acquired with
Armfield in 2015.
Taxation
The Group's tax charge arising from adjusted profit before tax
was GBP0.8 million compared to GBP1.8 million in 2015. The
effective tax rate for adjusted profit is 11.6% (2015: 20.0%). This
significant reduction is due to three reasons: reduced UK
corporation tax rates; significantly improved claims for research
and development tax credits; and achieving lower profitability in
the US than originally expected. The latter was impacted by weaker
demand at Armfield and a longer set-up period than expected
following the opening of our new US subsidiary at Scientifica. As
and when US profitability recovers this will weigh against the
overall tax rate. At the same time, whilst we remain an SME for
R&D tax credits the Group will derive the benefit from this
scheme.
Earnings per share
Adjusted basic earnings per share reduced by 22.3% to 84.8p
compared to 109.2p in 2015, while adjusted diluted earnings per
share receded to 83.7p (2015: 107.3p), a decrease of 22.0%.
Statutory basic earnings per share, after reflecting adjusting
items which were heavily influenced by the amortisation of
intangible assets arising from recent acquisitions, was 1.3p (2015:
12.8p) and statutory diluted earnings per share totalled 1.3p
(2015: 12.6p).
Order intake
Organic order intake in 2016 was weak for the first quarter,
similar to the previous two years. However, this weakness continued
until the end of May 2016 when order intake then rebounded strongly
and remained satisfactory for the rest of the year, resulting in a
small increase in overall organic intake of 2.9% for 2016 (2015:
12.7%). If Armfield (which was acquired in January 2015 and is
hence not part of organic growth on a like-for-like basis) was
included, order intake would have shown a 2.3% decline. 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. Our organic order book at 1 January 2017 was a robust 14.7
weeks of budgeted sales (1 January 2016: 11.4 weeks). Total order
book which includes Armfield and our 2016 acquisitions totalled
13.9 weeks.
Return on Capital
The Group closely monitors the return it derives on the capital
invested in its subsidiaries. At 31 December 2016 the annual rate
of Return on Total Invested Capital ("ROTIC") was 15.2% compared
with 24.1% at the end of 2015, which is disappointing. The
reduction illustrates the impact of the three underperforming
companies.
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 investment in
property, plant and equipment, goodwill and unamortised intangibles
and net current assets (excluding cash).
ROTIC is influenced by the overall performance of our businesses
and the size of, and multiple paid for, acquisitions. We continue
to strive to improve ROTIC although we remain cognisant of the
downward impact that acquiring businesses at higher multiples has
on overall ROTIC.
Dividends
In relation to the financial year ended 31 December 2016 the
Company paid an interim dividend of 9.0p per share in November
2016. The Board is recommending a final dividend of 18.5p per share
which will, in aggregate, total 27.5p per share (2015: 25.0p per
share), subject to shareholder approval, which is an increase of
10%. Dividend cover remains more than three times adjusted earnings
per share.
Your Group's policy is to pay a progressively increasing
dividend provided the Group retains sufficient cash and borrowing
resources with which to pursue its longstanding business
acquisition policies.
Headcount
The Group's total number of employees at year end stood at 417
(2015: 335). The growth in staff during the year is largely due to
the 2016 acquisitions.
Share capital and share options
The Group's issued share capital at 31 December 2016 totalled
6,107,628 Ordinary shares (2015: 6,098,549). The issued shares
arose from the exercise of share options by various members of
staff during the year.
Share options issued during the year under the 2015 scheme
totalled 29,500 (2015: 144,172) and the total share options in
issue under both the 2005 and 2015 schemes amounted to 268,411
(2015: 256,176).
Defined benefit pension scheme
The Group has a defined benefit pension scheme which was assumed
as part of the acquisition of Armfield in 2015. This scheme has
been closed to new members from 2001 and closed to new accrual in
2006. As part of the scheme's 2014 full actuarial valuation the
annual contributions to the scheme were increased to GBP0.2 million
subject to the next full actuarial valuation in 2017. At 31
December 2016 the net pension liability was GBP1.8 million (31
December 2015: GBP1.1 million). This increase in pension deficit is
primarily attributable to the significant decrease in discount
rates during 2016 from 3.9% to 2.8% offset partially by increases
in the returns achieved on fund assets. Armfield takes its
responsibility seriously to ensure the pension is adequately funded
whilst also continuing to keep under review appropriate methods to
control the deficit.
Cashflow and net debt
Cash generated from operations totalled GBP6.2 million (2015:
GBP8.5 million), with reduced cash conversion of 87% (2015: 92%)
due to additional working capital usage arising from the
operational difficulties at one of our businesses. Total capital
expenditure on property, plant and equipment amounted to GBP0.8
million compared to GBP0.5 million in 2015. Year-end cash balances
totalled GBP7.9 million (2015: GBP8.5 million).
Adjusted net debt at 31 December 2016 was GBP9.9 million
compared to GBP4.0 million at 31 December 2015. This increase of
GBP5.9 million is explained by the four acquisitions offset by the
Group's overall cash generation. Gearing at 31 December 2016 was
1.39 times adjusted operating profit (31 December 2015: 0.43
times). We remain committed to maintaining a conservative gearing
position whilst at the same time taking the opportunities of
acquiring strong, sound businesses at disciplined multiples as
illustrated over this past year.
The Group remains in a strong financial position. The existing
five-year banking arrangements with Lloyds Bank Corporate Markets
which were put in place in December 2014, have enabled the Group to
pursue its acquisitive strategy. Our historical acquisition loans
were consolidated into one single five-year amortising loan, which
is repaid at over GBP2 million per annum, and a GBP10.0 million
revolving acquisition facility, which following the four
acquisitions made during the year is now drawn to GBP9.3 million
(2015: GBP2.8 million). As and when opportunities arise for further
acquisitions, we may activate the uncommitted and undrawn accordion
facility of GBP10 million with the bank.
Overall, whilst your Group has had a positive year for
acquisitions but a disappointing year for performance, it remains
well placed to continue with its enduring strategy of achieving
growth in earnings via selective acquisitions of strong niche
businesses in the scientific instruments sector, alongside the
ongoing performance of its existing businesses.
Brad Ormsby
Group Finance Director
20 March 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Note Adjusted Adjusting items Total Adjusted Adjusting items Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 2 57,285 - 57,285 56,203 - 56,203
Operating costs 2 (50,141) - (50,141) (46,953) - (46,953)
Adjusted operating profit 2 7,144 - 7,144 9,250 - 9,250
Adjusting items 3 - (6,153) (6,153) - (7,443) (7,443)
Operating profit/(loss) 7,144 (6,153) 991 9,250 (7,443) 1,807
Interest income 9 - 9 28 - 28
Interest expense (523) (60) (583) (523) (60) (583)
Profit/(loss) before tax 6,630 (6,213) 417 8,755 (7,503) 1,252
Taxation (charge)/credit (767) 1,091 324 (1,753) 1,615 (138)
Profit/(loss) for the year 5,863 (5,122) 741 7,002 (5,888) 1,114
========== ================== ======== ======== =============== ========
Attributable to:
Owners of the parent 5,173 (5,092) 81 6,614 (5,839) 775
Non-controlling interests 690 (30) 660 388 (49) 339
Profit/(loss) for the year 5,863 (5,122) 741 7,002 (5,888) 1,114
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Retirement benefits actuarial (loss)/gain (776) 113
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign subsidiaries 126 13
-------- --------
Other comprehensive income for the year, net of tax (650) 126
-------- --------
Total comprehensive income for the year 91 1,240
======== ========
Attributable to:
Owners of the parent (569) 901
Non-controlling interests 660 339
======== ========
Earnings per share - adjusted Pence Pence
Basic 1 84.8 109.2
Diluted 1 83.7 107.3
===== =====
Earnings per share - total
Basic 1 1.3 12.8
Diluted 1 1.3 12.6
===== =====
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2016
2016 2015
Note GBP000 GBP000
ASSETS
Non-current assets
Goodwill 13,337 10,927
Other intangible assets 9,736 9,088
Property, plant and equipment 5,288 4,787
Deferred tax assets 776 351
29,137 25,153
--------- ---------
Current assets
Inventories 9,939 7,922
Trade and other receivables 11,341 11,040
Cash and cash equivalents 4 7,909 8,530
--------- ---------
29,189 27,492
--------- ---------
Total assets 58,326 52,645
========= =========
LIABILITIES
Current liabilities
Trade and other payables (11,682) (10,807)
Trade and other payables relating
to acquisitions (1,648) (85)
Borrowings 4 (2,693) (3,361)
Current tax liabilities (1,195) (1,436)
--------- ---------
(17,218) (15,689)
--------- ---------
Non-current liabilities
Borrowings 4 (13,855) (9,556)
Deferred tax liabilities (2,310) (1,922)
Retirement benefit obligations (2,198) (1,394)
--------- ---------
(18,363) (12,872)
--------- ---------
Total liabilities (35,581) (28,561)
========= =========
Net assets 22,745 24,084
========= =========
EQUITY
Share capital 305 305
Share premium account 14,472 14,441
Other reserves 2,130 2,004
Retained earnings 4,425 6,532
------- -------
Equity attributable to owners
of the parent company 21,332 23,282
Non-controlling interests 1,413 802
Total equity 22,745 24,084
======= =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Share Share Other Retained Total Non-controlling Total
capital premium reserves earnings attributable interests equity
to owners
of the
parent
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January
2016 305 14,441 2,004 6,532 23,282 802 24,084
--------- --------- ---------- ---------- -------------- ---------------- --------
Dividends - - - (1,581) (1,581) (49) (1,630)
Issue of
share capital - 31 - - 31 - 31
Share-based
payments - - - 169 169 - 169
Transactions
with owners - 31 - (1,412) (1,381) (49) (1,430)
--------- --------- ---------- ---------- -------------- ---------------- --------
Profit for
the year - - - 81 81 660 741
Retirement
benefit actuarial
loss - - - (776) (776) - (776)
Foreign exchange
differences - - 126 - 126 - 126
--------- --------- ---------- ---------- -------------- ---------------- --------
Total comprehensive
income for
the year - - 126 (695) (569) 660 91
--------- --------- ---------- ---------- -------------- ---------------- --------
At 31 December
2016 305 14,472 2,130 4,425 21,332 1,413 22,745
========= ========= ========== ========== ============== ================ ========
At 1 January
2015 300 14,294 1,374 6,910 22,878 512 23,390
--------- --------- ---------- ---------- -------------- ---------------- --------
Dividends - - - (1,385) (1,385) (49) (1,434)
Issue of
share capital 5 147 617 - 769 - 769
Share-based
payments - - - 119 119 - 119
Transactions
with owners 5 147 617 (1,266) (497) (49) (546)
--------- --------- ---------- ---------- -------------- ---------------- --------
Profit for
the year - - - 775 775 339 1,114
Retirement
benefit actuarial
gains - - - 113 113 - 113
Foreign exchange
differences - - 13 - 13 - 13
--------- --------- ---------- ---------- -------------- ---------------- --------
Total comprehensive
income for
the year - - 13 888 901 339 1,240
--------- --------- ---------- ---------- -------------- ---------------- --------
At 31 December
2015 305 14,441 2,004 6,532 23,282 802 24,084
========= ========= ========== ========== ============== ================ ========
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2016
2016 2015
GBP000 GBP000
Cash flows from operating
activities
Profit after tax 741 1,114
Adjustments for:
Financial instruments measured
at fair value:
Hedging contracts 21 10
Contingent consideration
measured at fair value - 25
Share-based payments 241 119
Depreciation 592 482
Amortisation of intangible
assets 5,155 6,736
Loss on disposal of property,
plant and equipment 30 30
Foreign exchange gain on
foreign currency loans 166 (15)
Interest income (9) (28)
Interest expense 523 523
Retirement benefit obligation
net finance cost 60 60
Contributions to defined
benefit plans (198) (198)
Tax (credit)/expense recognised
in income statement (324) 138
(Increase)/decrease in inventories (1,442) 617
Decrease/(increase) in trade
and other receivables 620 (2,759)
Increase in trade and other
payables 37 1,638
Cash generated from operations 6,213 8,492
Finance costs paid (522) (528)
Tax paid (1,080) (1,387)
Net cash from operating activities 4,611 6,577
-------- ---------
Cash flows from investing
activities
-------- ---------
Paid on acquisition of new
subsidiary (9,847) (11,421)
Gross cash inherited on acquisition 3,714 3,904
-------- ---------
Acquisition of subsidiaries,
net of cash acquired (6,133) (7,517)
Paid on the acquisition of
trade and certain assets (261) (33)
Purchase of property, plant
and equipment (835) (530)
Interest received 9 28
Net cash used in investing
activities (7,220) (8,052)
-------- ---------
Cash flows from financing
activities
Proceeds from issue of share
capital 31 150
Repayments of borrowings (3,945) (4,626)
Proceeds from bank loans 7,545 4,755
Repayment of loan notes (117) -
Equity dividends paid (1,581) (1,385)
Dividends paid - non-controlling
interest in subsidiary (49) (49)
Net cash from/(used in) financing
activities 1,884 (1,155)
-------- ---------
Net change in cash and cash
equivalents (725) (2,630)
Cash and cash equivalents
at the start of the year 8,530 11,148
Exchange movements 104 12
-------- ---------
Cash and cash equivalents
at the end of the year 7,909 8,530
======== =========
NOTES TO THE RESULTS ANNOUNCEMENT
FOR THE YEARED 31 DECEMBER 2016
1. Earnings per share
2016 2015
GBP000 GBP000
Profit attributable to owners
of the parent
Adjusted profit 5,173 6,614
Adjusting items 3 (5,092) (5,839)
---------- ----------
Profit for the year 81 775
---------- ----------
Pence pence
Earnings per share - adjusted
Basic 84.8 109.2
Diluted 83.7 107.3
Earnings per share - total
Basic 1.3 12.8
Diluted 1.3 12.6
Number Number
Issued ordinary shares at
the start of the year 6,098,549 5,996,211
Movement in ordinary shares
during the year 9,079 102,338
---------- ----------
Issued ordinary shares at
the end of the year 6,107,628 6,098,549
---------- ----------
Weighted average number of
shares in issue 6,102,463 6,054,699
Dilutive effect of share
options 80,957 109,140
Weighted average shares in
issue on a diluted basis 6,183,420 6,163,839
---------- ----------
Adjusted basic earnings per share is calculated on the adjusted
profit, which is presented before 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
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.
NOTES TO THE RESULTS ANNOUNCEMENT
FOR THE YEARED 31 DECEMBER 2016
2. Segment analysis
For the year ended Materials Vacuum Unallocated Total
31 December 2016 Sciences items
GBP000 GBP000 GBP000 GBP000
Revenue 28,162 29,123 - 57,285
Operating costs (22,937) (25,731) (1,473) (50,141)
---------- --------- ------------ ---------
Adjusted operating
profit 5,225 3,392 (1,473) 7,144
Adjusting items (6,153)
Operating profit 991
Net interest expense (574)
---------
Profit before tax 417
Income tax credit 324
Profit for the year 741
=========
For the year ended Materials Vacuum Unallocated Total
31 December 2015 Sciences items
GBP000 GBP000 GBP000 GBP000
Revenue 28,347 27,856 - 56,203
Operating costs (22,894) (22,957) (1,102) (46,953)
Adjusted operating
profit 5,453 4,899 (1,102) 9,250
Adjusting items (7,443)
Operating profit 1,807
Net interest expense (555)
---------
Profit before tax 1,252
Income tax charge (138)
Profit for the year 1,114
=========
Unallocated items relate to the Group's head office costs.
Segment assets and liabilities
At 31 December Materials Vacuum Unallocated Total
2016 Sciences items
GBP000 GBP000 GBP000 GBP000
Assets 14,963 22,445 20,918 58,326
Liabilities (6,622) (7,482) (21,477) (35,581)
---------- -------- ------------ ---------
Net assets 8,341 14,963 (559) 22,745
Capital expenditure 305 523 7 835
Depreciation 223 289 80 592
Amortisation 2,865 2,290 - 5,155
---------- -------- ------------ ---------
At 31 December Materials Vacuum Unallocated Total
2015 Sciences items
GBP000 GBP000 GBP000 GBP000
Assets 14,370 14,070 24,205 52,645
Liabilities (6,562) (7,026) (14,973) (28,561)
---------- -------- ------------ ---------
Net assets 7,808 7,044 9,232 24,084
Capital expenditure 117 202 211 530
Depreciation 185 233 64 482
Amortisation 4,246 2,490 - 6,736
---------- -------- ------------ ---------
Unallocated items are borrowings, intangible assets and goodwill
arising on acquisition, deferred tax, defined benefit obligations
and parent company net assets.
NOTES TO THE RESULTS ANNOUNCEMENT
FOR THE YEARED 31 DECEMBER 2016
2. Segment analysis (continued)
Geographic analysis Year to Year to
31 December 31 December
2016 2015
GBP000 GBP000
UK (domicile) 8,732 9,303
Rest of Europe 13,794 13,822
North America 15,489 12,526
Rest of the world 19,270 20,552
------------- -------------
Total Revenue 57,285 56,203
------------- -------------
Segmental revenue is presented on the basis of the destination
of the goods where known, otherwise the geographical location of
customers is utilised.
3 Adjusting items
Year to Year to
31 December 31 December
2016 2015
GBP000 GBP000
Amortisation of intangible
assets 5,155 6,736
Contingent consideration measured
at fair value - 25
Financial instruments measured
at fair value:
Hedging contracts 21 10
Share-based payments 241 119
Acquisition costs 736 553
------------ ------------
Total adjusting items in operating
profit 6,153 7,443
Retirement benefits obligation
net interest cost 60 60
------------ ------------
Total adjusting items 6,213 7,503
Taxation (1,091) (1,615)
------------ ------------
Total adjusting items net of
tax 5,122 5,888
------------ ------------
Attributable to:
Owners of the parent 5,092 5,839
Non-controlling interest 30 49
------------ ------------
5,122 5,888
------------ ------------
NOTES TO THE RESULTS ANNOUNCEMENT
FOR THE YEARED 31 DECEMBER 2016
4. Maturity of borrowings and net debt
Borrowings mature as follows:
Bank Subordinated Hire
loans loan purchase Total
31 December 2016 GBP000 GBP000 GBP000 GBP000
------------------------------------- ------- ------------ --------- -------
Repayable in less than
six months 1,387 379 5 1,771
Repayable in months seven
to twelve 1,352 - 3 1,355
------------------------------------- ------- ------------ --------- -------
Current portion of long-term
borrowings 2,739 379 8 3,126
Repayable in years one
to five 14,404 - 3 14,407
------------------------------------- ------- ------------ --------- -------
Total borrowings 17,143 379 11 17,533
Less: interest included
above (985) - - (985)
Less: cash and cash equivalents (7,909) - - (7,909)
------------------------------------- ------- ------------ --------- -------
Total net debt 8,249 379 11 8,639
------------------------------------- ------- ------------ --------- -------
Adjusting items
Subordinated debt to non-controlling
shareholders (379)
Accrued deferred consideration 1,648
------------------------------------- ------- ------------ --------- -------
Adjusted net debt 9,908
------------------------------------- ------- ------------ --------- -------
Bank Subordinated Hire
loans loan purchase Total
31 December 2015 GBP000 GBP000 GBP000 GBP000
------------------------------------- ------- ------------ --------- -------
Repayable in less than
six months 1,833 497 13 2,343
Repayable in months seven
to twelve 1,273 - 6 1,279
------------------------------------- ------- ------------ --------- -------
Current portion of long-term
borrowings 3,106 497 19 3,622
Repayable in years one
to five 9,981 - 11 9,992
------------------------------------- ------- ------------ --------- -------
Total borrowings 13,087 497 30 13,614
Less: interest included
above (697) - - (697)
Less: cash and cash equivalents (8,530) - - (8,530)
------------------------------------- ------- ------------ --------- -------
Total net debt 3,860 497 30 4,387
------------------------------------- ------- ------------ --------- -------
Adjusting items
Subordinated debt to non-controlling
shareholders (497)
Accrued deferred consideration 85
------------------------------------- ------- ------------ --------- -------
Adjusted net debt 3,975
------------------------------------- ------- ------------ --------- -------
A proportion of the group's bank loans is drawn in foreign
currencies to provide a hedge against assets denominated in those
currencies. The Sterling equivalent at 31 December 2016 of loans
denominated in Euros was GBP1,217,000 (2015: GBP1,050,000). These
amounts are included in the figures above for bank loans, repayable
in years 1 to 5.
NOTES TO THE RESULTS ANNOUNCEMENT
FOR THE YEARED 31 DECEMBER 2016
5. Acquisitions
During the financial year to 31 December 2016, the Group
completed four separate acquisitions, namely the purchase of
CoolLED Limited, Dia-Stron Limited and EWB Solutions Limited and
the trade and assets of Fire Instrumentation and Research
Equipment.
On 18 February 2016, the Group acquired 100% of the issued share
capital of CoolLED Limited, an instrument maker based in Andover,
Hampshire. CoolLED designs, manufactures and markets illumination
systems for fluorescence microscopy. CooLED was acquired for an
initial cash consideration of GBP3.5 million, a payment to reflect
excess working capital and an earn-out capped at GBP1.0 million
calculated via achievement of adjusted operating profits of GBP1.0
million in respect of the year to 30 June 2016, reducing by GBP4.50
for each GBP1 shortfall below GBP1.0 million. On 8 August 2016
GBP0.1 million was paid in full settlement of the earn-out.
On 29 March 2016, the Group acquired the trade and certain
assets of FIRE, a fire testing equipment manufacturing and
servicing business. The purchase consideration is not material in
the context of the overall Judges Group.
On 1 April 2016 the Group acquired 100% of the issued share
capital of Dia-Stron Limited, a company which designs and
manufactures systems to test the mechanical properties of fibres
and is based in Andover, Hampshire. Dia-Stron was acquired for a
cash consideration of GBP2.75 million plus a payment to reflect
excess working capital.
On 29 November 2016 the Group acquired 100% of the issued share
capital of EWB Solutions Limited, a manufacturer of edge-welded
bellows used in Ultra High Vacuum systems and various other
applications. EWB is based in Hemel Hempstead, Hertfordshire. EWB
was acquired for a cash consideration of GBP1.8 million and a
payment to reflect excess working capital.
The summary provisional fair value of the costs of these
acquisitions includes the components stated below:
Consideration GBP000
---------------------------------------------------------------------- ------
Initial cash consideration 8,223
Deferred consideration 100
---------------------------------------------------------------------- ------
8,323
---------------------------------------------------------------------- ------
Gross cash inherited on acquisition 3,714
Cash retained in the business (367)
---------------------------------------------------------------------- ------
Payment in respect of surplus working capital* 3,347
Total consideration 11,670
---------------------------------------------------------------------- ------
Acquisition-related transaction costs charged to the income statement 736
---------------------------------------------------------------------- ------
*Of the GBP3,347,000 payment in respect of surplus working
capital, GBP1,598,000 is payable in 2017.
The consideration and associated transaction costs for these
transactions were financed from existing cash resources and GBP4.5
million was drawn down from the Group's existing GBP10 million
acquisition loan facility.
The summary provisional fair values recognised for the assets
and liabilities acquired are as follows:
Fair value
Book value adjustments Fair value
GBP000 GBP000 GBP000
---------------------------------------- ---------- ------------ ----------
Property, plant and equipment 267 - 267
Intangible assets - 5,803 5,803
Deferred tax assets 115 28 143
Inventories 830 (255) 575
Trade and other receivables 921 - 921
Cash and cash equivalents 3,714 - 3,714
---------------------------------------- ---------- ------------ ----------
Total assets 5,847 5,576 11,423
---------------------------------------- ---------- ------------ ----------
Deferred tax liabilities (21) (1,109) (1,130)
Trade payables (728) (71) (799)
Current tax liability (234) - (234)
Total liabilities (983) (1,180) (2,163)
---------------------------------------- ---------- ------------ ----------
Net identifiable assets and liabilities 4,864 4,396 9,260
---------------------------------------- ---------- ------------ ----------
Total consideration 11,670
---------------------------------------- ---------- ------------ ----------
Goodwill recognised 2,410
---------------------------------------- ---------- ------------ ----------
NOTES TO THE RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2016
5. Acquisitions (continued)
Management performed a detailed review of each of the acquiree's
intangible assets. The intangible assets recognised reflect
recognition of acquired customer relationships, the value of the
acquired future committed order books, internally generated
technology, trademarks, domain names and distributor relationships.
A significant amount of the value of the acquired business is
attributable to its workforce and sales knowhow. As no assets can
be recognised in respect of these factors, they contribute to the
goodwill recognised upon acquisition.
Other fair value adjustments reflect specific inventory
provisions and accruals and related deferred tax assets. 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 and the fair value of the assets.
The acquisitions resulted in a profit after tax (before
adjusting items) attributable to owners of the parent company of
GBP908,000 in the period post-acquisition. After amortisation of
intangible assets, the contribution to owners of the parent
company's results amounted to a gain of GBP127,000 after tax.
If the acquisitions had been acquired on 1 January 2016, based
on pro-forma results, revenue for the Group for the year ended 31
December 2016 would have increased by GBP1,091,000 and profit after
tax (before adjusting items) attributable to owners of the parent
company would have increased by GBP265,000 after allowing for
interest costs but before charging amortisation of intangible
assets (a reduction of GBP375,000 after charging additional
amortisation of intangible assets of GBP640,000).
Armfield acquisition
There have been no amendments to the fair values presented in
the 2015 consolidated financial statements. As part of the terms of
the acquisition, there is a further contingent payment of
GBP360,000 which may become due if the triennial actuarial
valuation of Armfield's defined benefit pension fund as at 31 March
2017 shows a reduction in the yearly contribution required to
eliminate its funding deficit. The fair value of this consideration
has been recorded at GBPnil as the Directors consider that it is
unlikely that the Company will be required to settle this potential
payment.
6. Dividends
2016 2015
pence GBP000 pence GBP000
per per
share share
Second interim dividend
for the previous year 15.9 970 - -
Final dividend for
the previous year 1.0 61 14.7 892
First interim dividend
for the current year 9.0 550 8.1 493
25.9 1,581 22.8 1,385
======= ======= ======= =======
The Directors will propose a final dividend of 18.5p per share,
amounting to GBP1,130,000, for payment on 7 July 2017. 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.
Dividends declared by subsidiaries that are not wholly owned are
paid to the non-controlling interest in the period in which they
are declared and amounted to GBP49,000 in the year (2015:
GBP49,000).
7. Preliminary Announcement
This preliminary announcement, which has been agreed with the
auditors, was approved by the Board of Directors on 20 March 2017.
It is not the Group's statutory accounts. Copies of the Group's
audited statutory accounts for the year ended 31 December 2016 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 audit reports for the years ended 31 December 2016 and 31
December 2015 did not contain statements under Sections 498(2) or
498(3) of the Companies Act 2006. The statutory accounts for the
year ended 31 December 2015 have been delivered to the Registrar of
Companies, but the 31 December 2016 accounts have not yet been
filed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEDFMSFWSEID
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March 21, 2017 03:00 ET (07:00 GMT)
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