Full year results year ended 31 December 2017 David Cicurel, CEO Brad Ormsby, CFO 20 th March 2018
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 working capital requirements • Track record of acquisitions and reputation as a good acquirer – Sixteen 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 Fire Testing CoolLED Technology Quorum FIRE Technologies Scientifica PE.fiberoptics Deben Dia-Stron EWB Solutions 2005 2006 2009 2010 2011 2012 2013 2015 2016 2017 GDS Armfield Sircal Instruments Instruments Aitchee Oxford KE Engineering Cryosystems Developments UHV Design 3
Key Messages Continued execution of Positive outlook Strong financial strategy performance Robust opening order book Acquisition of Oxford Cryo Strong order intake YTD intake satisfactory Appointment of COO Sterling weakness Sterling? Investment in R&D 4
Performance in the period
Highlights Record revenues Cash from + 24.6% operations 2017 2017 £ 10.9m 2016 £71.4 million 2016 Organic growth 17.7% (2016: £6.2m) Organic order intake (2016: £2.7 million) + 16% Final dividend 2017 2017 2016 + 16% Total order book 2016 14.9 weeks (2016: £0.7 billion) Full year: 32p (2016: £2.4 million) Adjusted operating Adjusted net profit debt 2017 2017 + 53% 2016 2016 £ 8.0m £10.9 million (2016: £11.6 million) (2016: £9.9m) (2016: £10.5illion) Adjusted EPS Cash balance 6 + 56% 2017 2017 £ 10.7m 2016 2016 131.9p (2016: £7.9m) (2016: 61%) 6
Performance 2016 Variance Variance 2017 (£m) (£m) (£m) (%) Revenue 71.4 57.3 14.1 24.6% Organic revenue up 17.7% plus acquisitions Operating costs (60.5) (50.2) (10.3) 20.5% Adjusted operating 10.9 7.1 3.8 53% profit Organic EBITA contribution up 50% Interest (0.5) (0.5) Adjusted PBT 10.4 6.6 3.8 57.6% Effective tax rate 14% due to R&D Taxation (1.5) (0.8) tax credits; Higher than 2016 due to better US performance Adjusted PAT 8.9 5.8 3.1 53.4% Adjusting items (4.2) (5.1) (post tax) Adjusting items mainly amortisation and acquisition transaction fees Statutory PAT 4.7 0.7 4.0 7
Order intake • 2017 organic order intake 16% up on 2016; consistent positive order intake since June 2016 • Organic order book at 1 Jan 2018: 16.6 weeks (1 Jan 2017: 14.8 weeks) • 2016 and 2017 acquisitions trading as expected • Total order book 14.9 weeks at 1 Jan 2018 90,000 80,000 70,000 60,000 2018 YTD intake 50,000 satisfactory 40,000 30,000 20,000 10,000 8 Group (17 wks * 3) Group (ttm) Group (budget)
Revenue summary 2015 revenue 2015 EPS • Revenue growth of 25% to £71.4m • Like for like sales growth of 17.7% H1 H2 • Organic growth across US, EU, China and ROW H1 H2 2016 revenue • UK down reflecting Brexit research funding uncertainties 2016 EPS • 85+% of revenues exported 2016 2017 13% 14% H1 H2 21% H1 H2 24% Orders 2017 EPS 2017 revenue 26% 26% 12% 10% 26% 28% 13% 15% 23% 25% Revenue 25% 24% 11% H1 H2 11% H1 H2 9 27% 26%
Profit bridge £000s 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2016 Demand Production Organic Organic Acquisitions 2017 contribution recovery recovery growth decline contribution 10
Balance sheet and cash flow Cashflow 2017 (£m) 2016 (£m) Adjusted EBITDA 11.6 7.7 Dec 17 Dec 16 Balance Sheet Working capital movements (0.5) (0.8) (£m) (£m) Cash 10.9 7.9 Share based payments 0.3 0.2 Debt (18.9) (17.8) DB pension contributions (0.2) (0.2) Adjusted net debt (8.0) (9.9) Exceptional transaction fees (0.3) (0.7) Minority debt (0.1) (0.1) Cash generated from ops 10.9 6.2 Working Capital 7.5 8.3 Tax 0.1 (1.1) DB Pension (1.8) (1.8) Capex (inc acquisitions) (7.9) (7.2) Other assets / Interest payments (0.5) (0.5) 28.2 26.2 liabilities Repayment of borrowings (2.7) (3.9) Net assets 25.8 22.7 Proceeds from bank loans 4.5 7.5 Dividends (1.7) (1.6) Reduced net debt as 2017 acquisitions covered fully by cash generation Issue of shares 0.1 0.0 Movement in cash 2.8 (0.6) Armfield DB pension – triennial valuation in 2017 100% cash conversion of operating profit Increasing Focus on debt Reduction in working capital repayment dividend returns as production issues subside 11
Return On Total Invested Capital Return on Total Invested Capital ROTIC (Trailing 12 months)* GDS March 2012 FTT acquisition 50.0% Scientifica 45.0% June 2013 Armfield 40.0% January 2015 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 12 0.0% *excludes central costs and properties 12
Diversification Group revenue Group revenue by geography FTT Sircal UK Aitchee GDS PFO Rest of Armfield Europe DiaStron Quorum UHV North EWB America Deben Oxford Rest of Scientifica CoolLED World 13 13
12½ Year Financial History Financial history 12,000 Revenue and profit 80,000 35 140.0 EPS and Dividends 70,000 10,000 30 120.0 60,000 25 100.0 8,000 50,000 20 80.0 6,000 40,000 15 60.0 30,000 4,000 10 40.0 20,000 2,000 5 20.0 10,000 - - - - 2007 2009 2011 2013 2015 2017 2007 2009 2011 2013 2015 2017 7,000 Annual debt repaid + dividends paid from cashflow 6,000 CAGR 9.5% for 5,000 past 10 years 4,000 £'000 3,000 2,000 Focus on debt repayment 1,000 - 2007 2009 2011 2013 2015 2017 14 Dividends Repayment of borrowings
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 16
Acquisitions
Acquisition criteria and delivery • 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% • Post acquisition: – Create environment for businesses to thrive with support and advice for entity management teams – Implement robust financial controls – Repay debt and reinvest in further acquisitions – Succession planning 18
Acquisition of Oxford Cryosystems • Market-leading cryocooling systems for x-ray crystallography • £4.3m revenue and £0.9m operating profit • Acquired by subsidiary vehicle, Bordeaux, in July 2017 • Total consideration £5.1m cash inclusive of earn-out • Financed by £4.5m 5 year bank loan for Bordeaux • Management team remaining • Simultaneously increased Bordeaux stake from 51% to 75.5% for £1.3m cash • Both transactions earnings-enhancing 19
Outlook
Summary • Strong long-term growth drivers in higher education and process optimisation • Robust business model; pursued with discipline • Large pool of targets, every acquisition is earnings enhancing • Management focused on shareholder value – profitability, cash generation, debt repayment, dividend growth and return on capital • Inheritance tax free shareholding after two years • Well diversified by geography and by scientific application • Dividend growth of 10+% for past 12 years 21
Appendix • Management team • 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 • Previously CFO of Kalibrate Technologies plc; PwC trained Chartered Accountant • Mark Lavelle, Chief Operating Officer • 15 years leadership experience at Halma plc including 5 years as Divisional CEO Owners of 16% 23 of equity
Major shareholders 24
Our businesses 25
Our businesses 26
Our businesses 27
Our businesses 28
Our businesses 29
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