Full Year results Year ended 31 December 2019 David Cicurel, CEO Brad Ormsby, CFO 18 th March 2020
About Judges Scientific • Buy and build model within the scientific instrument market • Favourable market – Long term growth drivers – Large pool of potential acquisitions in global niches – Low capital requirements • Track record of acquisitions and reputation as a good acquirer – Seventeen acquisitions since May 2005 • Strict acquisition discipline Long term – Buying sustainable businesses at sensible prices drivers Low capital Shareholder value use Large deal pool 2
The Judges Group Moorfield Nanotechnology 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 USA 3
A snapshot of Group customers Universities Industry Other research and compliance OEMs 4
Key Messages Organic growth Record financial 2020 outlook performance Growth driven organically and Slower start to the year via operational excellence Growth across all financial Uncertainty regarding metrics Continued R&D investment Covid-19 Favourable FX Benefiting from diversification by geography and markets 25% increase in annual dividend 5
Performance review
Highlights Record revenues Cash from + 5.9% operations FY 2019 2018 FY 2019 FY 2018 FY 2018 2017 £ 19.1m £82.5 million (2018: £15.7m) Organic order intake (2016: £2.7 million) + 3.3% Annual dividend FY 2019 FY 2019 FY 2018 + 25% Total order book FY 2018 13.6 weeks (2016: £0.7 billion) 50p per share (2016: £ Adjusted operating Adjusted net profit debt 2018 + 18% FY 2019 £ 2.0m FY 2019 2017 FY 2018 £17.4 million FY 2018 (31 Dec 2018: (2016: £11.6 million) £0.9m net cash) (2016: £10.5illion) Adjusted EPS Cash balance 2018 FY 2019 2018 + 21% FY 2019 £ 14.1m 2017 FY 2018 2017 FY 2018 222.5p (31 Dec 2018: £15.7m) (2016: 61%) 7
Performance FY 2019 FY 2018 Variance Variance (£m) (£m) (£m) (%) Revenue 82.5 77.9 4.6 6% Revenue up 6% - order book growth and operational Operating costs (65.1) (63.2) 1.9 3% improvements Adjusted operating 17.4 14.7 2.7 18% profit Minimal impact from new IFRS 16 standard Interest (0.4) (0.4) Adjusted PBT 17.0 14.3 2.7 19% Effective tax rate 14.7% mainly due Taxation (2.5) (2.2) to R&D tax credits Adjusted PAT 14.5 12.1 2.5 21% Adjusting items Adjusting items mainly amortisation (2.6) (3.0) (post tax) from previous acquisitions Statutory PAT 11.9 9.1 2.8 30% 8
Order intake • Organic order intake up 3.3% 100 Millions compared with 2018 90 80 • Healthy but uneven intake 70 • 1 Jan 2020 Order book of 13.2 60 weeks (1 January 2019: 14.4 50 weeks) – actual amount 40 equivalent 30 20 • First 10 weeks of 2020 below 10 budget level Last 17 weeks annualised Trailing 12 months Budget 9
Revenue summary Origin of orders and revenue by geography 2018 2019 • Organic growth across: – North America up 17% Orders – China/Hong Kong up 23% • UK receded 10%, Brexit related? • Europe and Rest of the World remained flat Revenue 85+% of revenues exported 10
Profit bridge £000s 25,000 20,000 15,000 10,000 5,000 0 2018 contribution* Organic growth Organic decline Acquisition 2019 contribution* *Contribution is EBIT from trading 11 subsidiaries before central costs
Balance sheet and cash flow Cashflow 2019 (£m) 2018 (£m) Dec 19 Dec 18 Adjusted EBIT 17.4 14.7 Balance Sheet (£m) (£m) Depreciation (PPE) 0.8 0.8 Cash 14.1 15.7 Depreciation (IFRS 16 R-o-U) 0.9 - Debt (16.1) (14.8) DB pension contributions (0.2) (0.2) Adjusted net (debt)/cash (2.0) 0.9 Exceptional transaction costs (0.3) - Minority debt (0.1) (0.1) Working capital movements 0.5 0.4 Working Capital 6.9 7.5 Cash generated from ops 19.1 15.7 DB Pension (net of tax) (1.7) (1.5) Tax (2.2) (2.4) Other assets / liabilities 25.5 24.4 Interest paid (inc. IFRS R-o-U) (0.3) (0.5) Net assets 28.6 31.2 IFRS 16 lease repayment (0.9) - Capex (inc acquisitions) (1.9) (3.1) Minimal net debt despite special dividend and acquisition in December 2019 Drawdown of bank loans 2.3 - Repayment of borrowings (2.9) (3.2) Working capital <10% of revenue Dividends (annual) (2.7) (2.1) Armfield DB pension liability increased Dividends (special) (12.4) - with reduced discount rate Issue of shares 0.3 0.6 Movement in cash (1.6) 5.0 110% cash conversion of operating profit – under old IFRS would have been 105% 12
Return On Total Invested Capital Return on Total Invested Capital ROTIC (Trailing 12 months)* GDS FTT acquisition March 2012 50% Scientifica Armfield June 2013 January 2015 40% 2019: 31.4% 30% 20% Moorfield December 2019 10% 0% *excludes central costs and properties 13
Diversification Group revenue Group revenue by geography FTT Sircal Aitchee PFO GDS Armfield Dia-Stron Quorum UHV EWB Scientifica CoolLED Deben Oxford Moorfield UK Rest of Europe North America China/Hong Kong Rest of World 14
12½ Year Financial History Financial history 200 250.0 Revenue and profit EPS and Dividends 20000 90,000 180 80,000 160 200.0 70,000 140 15000 60,000 120 150.0 50,000 100 10000 40,000 80 100.0 30,000 60 5000 20,000 40 50.0 20 10,000 0 0.0 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Adjusted Earnings per Share FY dividend per share Revenue Operating Profit total 25000 20000 Cash generation 15000 COAGR 8.9% Focus on cash 10000 for past 12 generation years 5000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY cash generation Dividend* *excludes £12.4m special dividend in 2019 15
Strategy for growth
Growth drivers • M&A – Many global niches – Over 2,000 privately held businesses in the UK • Organic growth through – Long term secular organic growth trends in science • Global higher education • Process optimisation – Research and Development • 5-6% of annual revenue – Business optimisation • Leadership programme 17
Acquisitions
Acquisition of Moorfield Nanotechnology • High-quality physical and chemical thin film vapour deposition instruments • £2.5m revenues and £0.6m operating profit • Acquired in December 2019 • Total consideration of £2.3m cash including £0.7m earn-out • Financed directly from revolving acquisition facility • Earnings-enhancing • MD remaining, vendor retiring December 2020 19
Acquisition criteria • Strict acquisition discipline • Acquisition attributes: – Strong exporters in their global niche markets; solid EBIT margins – Generate sustainable profits and cashflows – Pay 3 to 6 times EBIT according to size – Borrow up to 2.5 times EBITDA @ 2 to 4% Long deal Crystallisation Financial Honourable in incubation notoriously certainty for process period erratic seller 20
Post acquisition • Financial – Implement robust financial controls – Reduce debt and reinvest in further acquisitions • Operational – Create environment for businesses to continue to thrive – Support and advice for entity management teams – Peer networking and collaboration – Internal benchmarking to encourage optimal performance • Strategic – Succession planning – Leadership programme – Long term focus …. Whilst maintaining autonomy 21
Outlook and investment case
Outlook Order intake slower than 2019 Covid-19 uncertainty Confident in business model 23
Investment Case • Robust business model; pursued with discipline • Large pool of targets, every acquisition is earnings enhancing • Strong long-term growth drivers in higher education and process optimization • Well diversified by geography and by scientific application • Management focused on shareholder value – profitability, cash generation, debt reduction, dividend growth and return on capital • Dividend growth of 10+% for past 14 years, CAGR 24% • Inheritance tax free shareholding after two years 24
Appendices • Management team • Major shareholders • Trading businesses
Management team • Alex Hambro, Non-Executive Chairman • Experienced adviser to private equity and VC funds and family office investors • David Cicurel, Chief Executive • Founded Judges in 2002; Turnaround specialist and veteran deal-maker • Brad Ormsby, Group Finance Director • Five years at Judges, previously CFO of Kalibrate Technologies plc; PwC trained Chartered Accountant • Mark Lavelle, Chief Operating Officer • 15 years leadership experience at Halma plc including five years as Divisional CEO Owners of 15% 26 of equity
Major shareholders David Cicurel (including SIPP, SIP and 44,000 non-beneficial) 759,411 12.2% Liontrust 568,447 9.1% Odin Global 356,435 5.7% JP Morgan Asset Management (UK) 352,234 5.7% Guy Naggar 320,000 5.1% Hargreaves Lansdown 215,831 3.5% Stephen Upton & Jacqueline Upton 188,100 3.0% Brown Shipley 184,332 3.0% Banque de Luxembourg 141,803 2.3% NFU Mutual 125,128 2.0% Polleit & Riechert Investment Management 122,270 2.0% Berenberg Asset Management 110,085 1.8% Directors (excluding those listed separately above) 196,789 3.2% 27
Our businesses 28
Our businesses 29
Our businesses 30
Our businesses 31
Recommend
More recommend
