REG - Judges ScientificPLC - Final Results
23/03/2022 07:00
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RNS Number : 6622F Judges Scientific PLC 23 March 2022
23 March 2022
Judges Scientific plc
("Judges Scientific", "Judges", the "Company" or the "Group")
FINAL RESULTS
Post-Covid recovery enables record performance
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 2021.
Key financials
Year ended 31 December 2021 2020 Change
Revenue £91.3m £79.9m 14%
Adjusted* operating profit £18.8m £14.4m 31%
Adjusted* basic earnings per share 238.1p 177.2p 34%
Cash generated from operations £19.6m £14.6m 34%
Final dividend per share 47.0p 38.5p 22%
Statutory operating profit £15.6m £10.2m 53%
Statutory basic earnings per share 201.0p 131.1p 53%
As at: 31 Dec 2021 31 Dec 2020
Adjusted* net cash/(debt) (excl. IFRS 16) £1.4m £(5.7)m
Cash balances £18.4m £15.5m
Statutory net cash/(debt) (excl. IFRS 16) £1.4m £(5.7)m
Other financial highlights
· Organic** revenue increased 10% against 2020;
· Organic** order intake up 25% compared with 2020; and 8.5% up
compared with record 2019***;
· Organic** order book at 22.6 weeks (2020: 14.7 weeks); total
order book at 23.0 weeks;
· New £60m five-year bank facility to provide greater acquisition
financing capability;
· Proposed final dividend of 47p, totalling 66p for the year, an
increase of 20%; covered 3.6 times by adjusted earnings.
Strategic Highlights
· Holding in Bordeaux Acquisition increased from 75.5% to 88%.
Outlook
· More normalised trading environment resuming;
· War in Ukraine further exacerbating supply chain issues;
· Record order book is a strong indicator of further recovery.
* 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 2020.
*** For this measure only, Organic excludes the performance of Moorfield
which was acquired in 2019.
Alex Hambro, Chairman of Judges Scientific, commented:
"I am pleased to report that your Group has delivered record revenue, profits,
cash generation and dividends in a year which still presented challenges as a
consequence of the pandemic. The resilience of the Group's business model and
a good performance from recent acquisitions alongside the hard work by all our
colleagues have enabled Judges to stage a solid recovery."
For further information please contact:
Judges Scientific
David Cicurel, CEO Tel: +44 (0) 20 3829 6970
Brad Ormsby, Group FD
Shore Capital (Nominated Adviser & Broker)
Stephane Auton Tel: +44 (0) 20 7408 4090
Iain Sexton
Liberum (Joint Broker) Tel : +44 (0) 20 3100 2222
Bidhi Bhoma
William Hall
Media enquiries:
Alma PR (Financial Public Relations)
Sam Modlin Tel: +44 (0) 20 3405 0205
Rebecca Sanders-Hewett judges@almapr.co.uk (mailto:judges@almapr.co.uk)
Justine James
Joe Pederzolli
Notes to editors:
Judges Scientific plc (AIM: JDG), is a group focused on acquiring and
developing companies in the scientific instrument sector. The Group
currently consists of 19 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
(http://www.judges.uk.com/)
CHAIRMAN'S STATEMENT
The Group demonstrated its resilience and adaptability in 2020 at the onset of
the Covid-19 pandemic. Throughout 2021 we still had to navigate numerous
challenges as the uncertainty caused by the pandemic continued to impact the
world, with travel restrictions and new variants having to be managed. Despite
this, the Group experienced progressive improvement enabling it to recover and
to deliver, once again, record revenue, profit and cash generation supported
by a record order intake. Notwithstanding the utterly deplorable events
unfolding in Ukraine, we enter 2022 with cautious optimism as our business
model has proven its resilience and the strength of our order book gives
confidence for further recovery.
Generating attractive returns for our shareholders remains the core objective
of the Group and as such the Board is pleased to be recommending a final
dividend of 47p, making a total of 66p in respect of 2021, a 20% increase on
the prior year (2020: 55p). Since the payment of the first dividend in respect
of 2006, regular dividends have grown at a compound annual rate of 22.9% and
total dividend distributions have aggregated to nearly six times the 2005
re-admission price of 100p.
Strategy
The Group's strategy remains unchanged, based as it is on creating shareholder
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 are highly selective in seeking to acquire businesses with a
focus on 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 underlying strength with robust and defensible
margins.
Post-acquisition the Group provides a favourable environment for these
businesses to continue to prosper. Much effort is invested into helping their
autonomous management improve their operating metrics as organic growth and
optimisation is an ever-growing component of shareholder returns.
As a result of the dependable growth of our 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.
The underlying 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 and the need for
measurement tools to support the relentless worldwide search for optimisation
and discovery across industry and science.
Our team
The Group's ability to deliver this record performance would not have been
possible without our colleagues, all of whom have yet again worked very hard
in a challenging environment in order to further develop our businesses and
take full advantage of a gradual return toward normality. Whilst we remained
impacted by the pandemic our 500-strong team continued to exercise caution and
discipline to protect their colleagues and keep each other safe. I am sure
our shareholders join the Board in thanking them for their continued
dedication.
Alex Hambro
Chairman
22 March 2022
CHIEF EXECUTIVE'S REPORT
Whilst we started the 2021 financial year with renewed optimism looking
forward to a more familiar environment as a consequence of the mass
vaccination programmes, we still had to navigate external challenges
throughout the year under review. The continued restrictions on travel were
the biggest hurdle to overcome as our ability to visit customers and attend
scientific conferences and trade conventions was hindered, as most were held
virtually; and to a lesser extent, a number of our corporate customers
retained freezes on capital expenditure. The Group was also not immune to the
widely reported supply chain issues seen across the globe. These supply chain
issues, which had been benign at the start of the pandemic, surfaced as an
increasing but still manageable headwind. Despite these challenges our Group
showed its resilience, delivering a strong recovery and a record
performance.
With the constant changes in the UK Covid situation, the year was particularly
suited to devolved local tactical improvements that the Group's structure and
culture promotes so effectively. With each business seeing a different
market situation, a varied degree of staff availability and Covid resilience,
and with differing building layouts influencing options, each of our
businesses responded differently. Given market conditions, some found that
R&D could be accelerated, while others had to pause; some were able to
upgrade their online presence and impact (including remote installations)
while some markets resisted this. The fact that six of our businesses recorded
not just full recoveries but all-time record profits suggests that many
emerged from the pandemic fundamentally stronger than they entered it. The
businesses have also become better at constantly sharing their challenges and
successes, so that best practice can be continually developed across the
Group, a fundamental part of our strategy as we look to drive organic
growth. 2022 began with the widely reported component shortages and delivery
restrictions, so whilst life is not completely back to normal, we will
continue with our dedication to raise the operational bar across the Group:
seeking to improve the less advanced production processes, upgrade the less
integrated IT systems, and focus R&D efforts to deliver fewer but more
targeted innovations more quickly.
Order intake
Order intake is the main driver of our business. With the easing of
restrictions, intake improved throughout the year: Organic* intake was up 25%
year-on-year in the first half and accelerated to maintain its advance at 25%
for the year as a whole, in spite of tougher comparatives in the second half
(H1 2020 intake suffered the worst effect of Covid). Organic** order intake
progressed 8.5% against 2019, our previous record.
The best performance was recorded in North America (up 39%, following a 26%
decline in 2020) followed by the Rest of the World (up 31% following a 25%
decline), the UK (up 27% after growing 8% in 2020) and the Rest of Europe (up
22% after growing 3% in 2020). China/Hong Kong, which had receded 22% in
2020, stabilised and was broadly flat. The largest year-on-year absolute
progress was achieved in the USA, followed by the UK, the Czech Republic,
Japan, France, Germany and Australia. The Netherlands and Belgium showed the
largest absolute declines after strong progress in 2020. Order intake still
varied considerably from business to business and between scientific
disciplines; all businesses except one grew from 2020 and among those
servicing large corporate customers enforcing capex freezes, one staged a
strong revival and one only improved late in the year.
As a result of the accelerating order intake, the Organic order book
progressed from 16.1 weeks of budgeted sales on 30 June to 22.6 weeks at the
year-end (31 December 2020: 14.7 weeks). The Group's total order book ended
the year at 23.0 weeks.
* "Organic" in this report describes the performance of the Group excluding
THT and Korvus as they were acquired since 1 January 2020.
** For this measure only, Organic excludes the performance of Moorfield which
was acquired in 2019.
Revenues
Although Covid continued to challenge our operations, disruptions were less
prevalent than in 2020 and alleviated as the year progressed; the use of the
furlough scheme shrank strongly and many of our colleagues were able to return
to their offices, although a degree of flexibility will endure. Installations
remained disrupted by travel restrictions and logistic difficulties slowed
down the recognition of some revenue. Global supply chain issues became more
challenging; they were successfully managed albeit with some impact in terms
of management effort, purchase prices, excess inventory and product redesign.
Group revenues for the financial year ended 31 December 2021 progressed
from £79.9 million to £91.3 million, including Organic* growth of 10% and
the full year contribution from the two acquisitions completed in 2020.
The Group continues to be a strong exporter and is well diversified across the
globe, with 22% of the Group's revenues earned in North America, 32% in the
Rest of Europe and 12% in China/Hong Kong. Organic revenues grew strongly
in all regions except China/Hong Kong (down 28% after growing 18% in
2020). North America recovered 11% (down 32% in 2020), the Rest of the World
grew 3% (down 18% in 2020), and the Rest of Europe 16% (down 3% in 2020);
the UK, which had receded 6% in 2020, grew 43%.The most notable absolute
swings were the UK (up £4 million), Germany (up £2 million), the USA (up
£2 million) and the Czech Republic (up £1 million) whilst China/Hong Kong
was down £3 million (up £2 million in 2020).
Profits
The most important driver of Judges' operating margins is volume. The strong
recovery in Organic revenue, with some help from savings on travel and
exhibitions still continuing, drove our EBITA margin before central costs to
25% (2020: 21.2%, 2019: 24%). Adjusted profit before tax and adjusting items
progressed to a record £18.1 million (2020: £13.7 million, 2019: £17.0
million). All measures of profitability were flattered compared to previous
years as, for the first time, £0.8 million of R&D expenditure was
capitalised in compliance with IAS 38, with no meaningful amortisation to
offset it. Organic operating contribution increased 28%. All the Group
businesses increased their contribution except two, one of which had achieved
its record in 2020; six companies achieved new record contribution in 2021.
The operating subsidiaries combined produced a Return on Total Invested
Capital of 28.3% (2020: 23.5%, 2019: 31.4%).
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 £6.2 million in 2021 (2020: £6.2 million), equivalent to 6.8%
of Group revenue (2020: 7.7%).
The increase in pre-tax profits was replicated in earnings per share: Adjusted
earnings per share progressed by 34% from 177.2p to 238.1p beating the 2019
record of 222.5p; adjusted fully diluted earnings per share similarly
progressed to 234.9p (2020: 173.9p).
Corporate activity
The Group purchased a further 12.5% interest in Bordeaux Acquisition (the
holding company for Deben UK and Oxford Cryosystems) for £1.8 million,
bringing our ownership to 88%.
As a buy and build focused group, the acquisition of new businesses is a
fundamental feature of Group strategy. Executing this effectively is key to
ensure that long-term value is generated for shareholders. We retain a strict
acquisition discipline and are highly selective in relation to both the
acquisition cost 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.
The uncertainty caused by Covid didn't encourage owners to offer their
businesses for sale and the Group didn't complete any acquisitions during the
year.
Cashflow
In spite of the build-up of precautionary stock, of logistical issues delaying
revenue recognition and of receivables relating to outstanding installations,
cash conversion was satisfactory at 104% (2020: 102%), with cash generated
from operations of £19.6 million (2020: £14.6 million). As a result,
year-end cash balances increased to £18.4 million from £15.5 million as
at 31 December 2020. Adjusted net cash (excluding IFRS 16 lease liabilities
but including sums still due in respect of acquisitions) at the year-end
amounted to £1.4 million (2020: £5.7 million net debt).
Dividends
Your Board is recommending a final dividend of 47p per share subject to
approval at the forthcoming Annual General Meeting on 24 May 2022, which will
make a total distribution of 66p per share in respect of 2021 (2020: 55p per
share). The total dividend per share is 3.6 times covered by adjusted earnings
per share (2020: 3.2 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 8 July 2022 to shareholders on the register on 10 June 2022 and the
shares will go ex-dividend on 9 June 2022.
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 remain
positive. Market demand is being driven primarily by the strong worldwide
growth in higher education and the enduring pursuit of optimisation across
science and industry, and of course optimisation requires measurement.
In parallel to 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, research funding,
currency fluctuations and the business climate in major trading blocs,
particularly the USA and China.
In the medium-term horizon the competing goals, in the various jurisdictions
where the Group operates, of stimulating recovery and of reducing ballooning
government deficits will increase uncertainty in worldwide research funding.
It appears that re-emerging inflation may not be as temporary as proclaimed
and higher interest rates could accentuate government deficits and bring back
austerity, whilst higher interest rates may alter the competitive balance in
M&A activity to the detriment of more highly geared participants.
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 its revenue originates from
countries where the standard of value is the US Dollar (one half of total
revenue) or the Euro (one third of total revenue). The currency movements
since the run-up to the Brexit referendum vote have had a positive influence
on our margins and our competitiveness; the recent resolution of the Brexit
uncertainty might have improved the outlook for Sterling but exchange rates
have continued to remain favourable to our Group.
Outlook
The long-term drivers for our business are as strong as ever and we remain
confident in the Group's resilience and adaptability. The expectation of a
year less dominated by Covid has been overshadowed with Europe being shaken by
the Russian leadership's invasion of Ukraine. Whilst our direct exposure to
Russia and Ukraine is limited (0.4% of group revenue over the past three
years), the war is further exacerbating supply chain difficulties and may in
future create competing claims for public funds across the world.
Nevertheless, the Group is starting the year with a record order book, order
intake slightly ahead of the first 11 weeks of 2021 and a robust financial
position, leaving it well equipped to pursue its unchanged strategy.
David Cicurel
Chief Executive
22 March 2022
FINANCE DIRECTOR'S REPORT
The Group's strategy is based on acquiring companies within the scientific
instruments sector and continued profitable performance at its existing
subsidiary businesses.
Key Performance Indicators
The Group's financial Key Performance Indicators, which are aligned with the
ability to reduce acquisition debt and fund dividend payments to shareholders,
are adjusted earnings per share, adjusted operating margins, 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 delivered well in 2021 as the Group has delivered a
strongly profitable performance in returning to normal after the effects of
Covid-19 in 2020.
2021 2020
Adjusted basic earnings per share 238.1p 177.2p
Adjusted operating profit margin 21% 18%
Return on total invested capital 28.3% 23.5%
Cash conversion 104% 102%
Organic order intake +25% -13%
Revenue
Group revenues increased to £91.3 million, up 14% on the £79.9 million in
2020. Organic revenues grew by 10% (2020: Organic decline of 12%) as much
improved order intake enabled higher throughput. The balance of the growth was
provided by full year contributions from THT and Korvus, the businesses
acquired in May 2020 and October 2020, respectively.
Across our two segments, Materials Sciences total revenues improved by £7.5
million to £40.7 million (2020: £33.2 million) whilst Vacuum revenues rose
by £3.9 million to £50.6 million (2020: £46.7 million).
Profits
The improvement in revenue supported strong growth in profits and
profitability. Adjusted operating profits increased by £4.4 million to £18.8
million, a 31% uplift and, due to the operational gearing of the Group, this
also meant that the Group achieved operating margins of 21%, up from 18% in
2020. This shows the Group's good recovery from the challenges of the previous
year and despite having to navigate the global supply chain challenges that
the Group, amongst many others, faced in particular through the second half of
this year.
Compared with the pre Covid-19 performance in 2019, on the face of it the
results are better, with adjusted operating profit up £1.4 million. However
it is important to appreciate a few items that affect this comparison.
Firstly, we have acquired 3 businesses since December 2019; secondly we have
incurred lower travel and marketing costs as a result of the inability to
travel; and thirdly, this year, for the first time, we have also capitalised
£0.8 million of internally generated development costs; all of which flatter
any comparison to 2019.
Average sterling rates strengthened in 2021, as an example by around 7%
against the US Dollar, which was a minor drag on our performance, but overall
rates remained at a beneficial level for the Group and we enter 2022 with the
environment remaining fairly aligned with 2021. Adjusted profit before tax was
£18.1 million compared to £13.7 million in 2020, an increase of 32%.
Statutory operating profit increased to £15.6 million (2020: £10.2 million),
and statutory profit before tax was £14.9 million compared to £9.5 million
in 2020.
Capitalisation of development costs
This year for the first time, in accordance with IAS 38, we were required to
capitalise £0.8 million of our total R&D expense relating to development
of new or significantly improved products. The related amortisation on these
amounts capitalised is £0.0 million. This has had the effect of artificially
improving our result for the year by approximately 10 pence of earnings per
share. As products are completed, their development costs will be amortised
through the income statement over the next three years. We are likely to have
a materially similar run rate of capitalisation over the coming years, so
whilst there has been a performance-enhancing effect on the results this year,
this effect will diminish over the next two to three years.
Adjusting items
The total pre-tax adjusting items of £3.2 million were recorded in 2021
(2020: £4.2 million). The main constituents were amortisation of intangible
assets recognised upon acquisition of £2.6 million (2020: £3.2 million),
lower due to no acquisitions having completed in 2021 and hence also £nil of
acquisition costs (2020: £0.6 million).
Finance costs
Net finance costs (excluding adjusting items) totalled £0.7 million (2020:
£0.6 million) arising from the Group's existing debt. Given recent increases
to Bank of England interest rates, this will likely mean that interest costs
will remain relatively stable despite amounts being repaid. Statutory net
finance costs were £0.8 million (2020: £0.7 million), the £0.1 million
difference between the statutory and adjusted figures is attributable to the
net finance cost arising from the defined benefit pension scheme acquired with
Armfield in 2015.
Taxation
The Group's tax charge arising from adjusted profit before tax was £2.8
million (2020: £2.0 million). The effective tax rate on adjusted profits is
15.2% compared with 14.8% in the prior year and this increase reflects
relatively stable benefits from research and development tax credits set
against the significant growth in profits this year.
The effective tax rate is influenced by the wider regime of low UK and US
corporate tax rates and by claims for UK research and development tax credits.
The Group benefits from a tax rate lower than the standard UK corporation rate
as we continue to invest heavily in R&D, although now that the Group
exceeds 500 full-time equivalent employees, we will in future move into the
large companies R&D scheme which provides a lower level of credit against
the standard UK corporate rate, which itself is also due to substantially rise
in the coming years.
Earnings per share
Adjusted basic earnings per share increased from 177.2p to 238.1p, an increase
of 34% and adjusted diluted earnings per share was 35% higher at 234.9p (2020:
173.9p).
Statutory basic earnings per share, after reflecting adjusting items which are
influenced by the amortisation of intangible assets arising from recent
acquisitions, was 201.0p (2020: 131.1p) and statutory diluted earnings per
share totalled 198.2p (2020: 128.7p).
Order intake
Organic order intake was pleasingly 25% ahead of the Covid-19 affected prior
year and was strong throughout 2021. This allowed our businesses to finish
rebuilding their order books and then deliver higher performance as we
progressed through 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 strong intake resulted in a
closing Organic order book at 31 December 2021 of 22.6 weeks of budgeted sales
(31 December 2020: 14.7 weeks). Total order book was 23.0 weeks, including THT
and Korvus, giving a healthy platform to commence 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 2021 reflected a good recovery throughout 2021 and
hence ROTIC improved to 28.3% (2020: 23.5%). There is still room to improve
this, and it reflects that not all our businesses are back operating at their
full potential following the pandemic.
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).
ROTIC is influenced by the overall performance of our businesses and the size
of, and multiple paid for, acquisitions. We always strive to improve Group
ROTIC whilst accepting the inevitable downward pressure on overall returns
that would arise from acquiring businesses at multiples higher than 3 times.
Dividends
For the financial year ended 31 December 2021 the Company paid an interim
dividend of 19.0p per share in November 2021. Following a good performance in
2021, the Board is recommending a final dividend of 47.0p per share giving a
20% increase in the total dividend for the year of 66.0p per share (2020:
55.0p per share). Dividend cover is approximately 3.6 times adjusted earnings
per share.
Your Group's policy is to pay a progressively increasing dividend 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 2021 stood at 519 (2020:
499). This growth reflects the full year contribution from our 2020
acquisitions and also a return to recruitment to support the Group's long-term
growth strategy.
Share capital and share options
The Group's issued share capital at 31 December 2021 totalled 6,318,415
Ordinary shares (2020: 6,299,163). The shares issued during 2021 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 60,986
(2020: 6,151) and the total share options in issue at the year-end under both
the 2005 and 2015 schemes amounted to 201,460 (2020: 160,026).
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 next triennial full actuarial valuation
will be in 2023 and the current annual contributions to the scheme are £0.4
million. The Group accounts for post-retirement benefits in accordance with
IAS 19 Employment Benefits. The Consolidated balance sheet reflects the net
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 2021, the pension liability (net of deferred tax) was
£1.0 million (31 December 2020: £2.7 million). This reduction to the net
liability primarily resulted from the deficit reduction payments, good fund
asset performance and an increase to the discount rates. Armfield takes its
responsibility seriously to ensure the pension is adequately funded whilst
also continuing to review appropriate deficit control strategies.
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 £19.6 million (2020: £14.6 million), and a high
conversion rate of adjusted operating profit into cash of 104% (2020: 102%).
This was achieved despite having to invest in our inventory levels following
the growing challenges with global supply chain issues and still experiencing
delays in collections due to ongoing restrictions which impacted on our
ability to travel to customers to complete installations and training across
the world and consequently be paid upon completion.
Total capital expenditure on property, plant and equipment amounted to £2.7
million (2020: £1.3 million). This figure is higher than usual due to a £1.3
million property purchase to enable the relocation of Oxford Cryosystems from
two small units into a single building, and from utilising the Government's
special investment allowance. Year-end cash balances totalled £18.4 million
(2020: £15.5 million).
The Group ended 2021 with net cash (excluding IFRS 16 liabilities) of £1.4
million compared with £5.7 million of adjusted net debt at the end of 2020.
Gearing, calculated as the proportion of net cash/debt compared to adjusted
operating profit, at 31 December 2021 was -0.07 times (2020: 0.40 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. The £7.1 million growth in net cash is a result of the
strong 2021 performance offset partially by the investments in capital
expenditure (£2.7 million), settling corporate taxes (£2.2 million), the
continuation of our policy of paying progressively increasing dividends to
shareholders (£3.6 million in 2021) and a £1.8 million outlay on acquiring
additional shares in Bordeaux.
The Group's financial position continues to be a strength and we have suitable
banking facilities to support inorganic growth. On 26 May 2021 the Group
entered into new banking facilities ("Facility") with Lloyds Banking Group plc
(the "Bank") for an aggregate £60.0 million, which replaced its previous
£35.0 million banking arrangements. The new Facility will provide the Group,
in support of its buy and build strategy, with greater acquisition capacity,
both in terms of higher frequency and/or larger deals.
The Facility consists of a £19.0 million term loan ("Term Loan"), a committed
£35.0 million revolving credit facility ("RCF") plus a £6.0 million
uncommitted accordion facility, which can be drawn at the discretion of the
Bank. 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 Facility has a five year term ("Borrowing Term") with interest consistent
with previous banking arrangements and likewise with banking covenants,
namely:
· Gearing no greater than 2.5 times Adjusted EBITDA
· Interest cover no less than 3 times; and
· Adjusted EBITDA cover of greater than £7.5 million plus 75% of
any future acquired company's adjusted EBITDA.
The accordion increases by the amount paid off the Term Loan, keeping the
overall Facility at £60.0 million throughout the Borrowing Term.
The existing lending facilities via Bordeaux Acquisition Limited the Group's
88% owned subsidiary remain unchanged. Bordeaux owns the trading companies of
Deben UK Limited and Oxford Cryosystems Limited.
At the year end the Term Loan was £16.1 million (2020: £4.5 million) and the
RCF was undrawn (2020: £15.0 million), with £35.0 million available to
drawdown for future acquisitions. At 31 December 2021, repayments on the
Bordeaux loan had reduced the outstanding balance to £0.9 million (2020:
£1.7 million).
The ongoing long-term support of Lloyds Bank is greatly appreciated and
continues to provide the Group with major capacity to capitalise on
opportunities to support the Group's buy and build strategy.
Overall 2021 was a positive year for the Group. Thanks to the outstanding
efforts by all our team, we achieved a strong performance with excellent cash
generation despite having to battle through many problems caused by the global
supply chain issues and the enduring uncertainty surrounding the Covid-19
pandemic and its many variants. The Group remains in a strong position, with a
healthy balance sheet, robust opening order book with which to start 2022 and
significant available borrowing capacity, and is therefore well positioned to
continue its 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
22 March 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
Note Adjusted Adjusting Total Adjusted Adjusting items Total
items
£000 £000 £000 £000 £000 £000
Revenue 2 91,289 - 91,289 79,865 - 79,865
Operating costs 2 (72,512) (3,158) (75,670) (65,508) (4,191) (69,699)
Operating profit/(loss) 18,777 (3,158) 15,619 14,357 (4,191) 10,166
Interest income 2 - 2 14 - 14
Interest expense (713) (48) (761) (654) (53) (707)
Profit/(loss) before tax 18,066 (3,206) 14,860 13,717 (4,244) 9,473
Taxation (charge)/credit (2,753) 797 (1,956) (2,029) 1,204 (825)
Profit/(loss) for the year 15,313 (2,409) 12,904 11,688 (3,040) 8,648
Attributable to:
Owners of the parent 15,027 (2,345) 12,682 11,108 (2,888) 8,220
Non-controlling interests 286 (64) 222 580 (152) 428
Profit/(loss) for the year 15,313 (2,409) 12,904 11,688 (3,040) 8,648
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Retirement benefits actuarial gain/(loss) 1,445 (1,378)
Deferred tax on retirement benefits actuarial gain/(loss) (206) 286
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign subsidiaries 22 (82)
Other comprehensive income for the year, net of tax 1,261 (1,174)
Total comprehensive income for the year 14,165 7,474
Attributable to:
Owners of the parent 13,943 7,046
Non-controlling interests 222 428
Earnings per share - adjusted Pence Pence
Basic 1 238.1 177.2
Diluted 1 234.9 173.9
Earnings per share - total
Basic 1 201.0 131.1
Diluted 1 198.2 128.7
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021
2021 2020
£000 £000
ASSETS
Non-current assets
Goodwill 18,713 18,713
Other intangible assets 5,056 6,909
Property, plant and equipment 8,254 6,678
Right-of-use leased assets 4,186 5,125
Deferred tax assets 3,081 2,153
39,290 39,578
Current assets
Inventories 14,133 12,585
Trade and other receivables 17,146 14,340
Cash and cash equivalents 18,408 15,523
49,687 42,448
Total assets 88,977 82,026
LIABILITIES
Current liabilities
Trade and other payables (19,373) (15,828)
Borrowings (4,657) (3,857)
Right-of-use lease liabilities (887) (947)
Current tax liabilities (1,726) (1,539)
(26,643) (22,171)
Non-current liabilities
Borrowings (12,351) (17,358)
Right-of-use lease liabilities (3,420) (4,209)
Deferred tax liabilities (1,845) (1,945)
Retirement benefit obligations (1,324) (3,295)
(18,940) (26,807)
Total liabilities (45,583) (48,978)
Net assets 43,394 33,048
EQUITY
Share capital 316 315
Share premium account 16,667 16,429
Other reserves 1,999 1,977
Retained earnings 23,794 13,469
Equity attributable to owners of the parent company 42,776 32,190
Non-controlling interests 618 858
Total equity 43,394 33,048
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share Share Other Retained Total Non-controlling Total equity
capital premium reserves earnings attributable interests £000
£000 £000 £000 £000 to owners of £000
the parent
£000
At 1 January 2021 315 16,429 1,977 13,469 32,190 858 33,048
Dividends - - - (3,630) (3,630) - (3,630)
Change in non-controlling interest - - - (1,371) (1,371) (462) (1,833)
Issue of share capital 1 238 - - 239 - 239
Purchase of own shares for Company reward scheme - - - (53) (53) - (53)
Deferred tax on share-based payments - - - 823 823 - 823
Share-based payments - - - 635 635 - 635
Transactions with owners 1 238 - (3,596) (3,357) (462) (3,819)
Profit for the year - - - 12,682 12,682 222 12,904
Retirement benefit actuarial loss - - - 1,239 1,239 - 1,239
Foreign exchange differences - - 22 - 22 - 22
Total comprehensive income for the year - - 22 13,921 13,943 222 14,165
At 31 December 2021 316 16,667 1,999 23,794 42,776 618 43,394
At 1 January 2020 311 15,453 2,059 10,048 27,871 821 28,692
Dividends - - - (3,231) (3,231) - (3,231)
Change in non-controlling interest - - - (680) (680) (391) (1,071)
Issue of share capital 4 976 - - 980 - 980
Deferred tax on share-based payments - - - (113) (113) - (113)
Share-based payments - - - 317 317 - 317
Transactions with owners 4 976 - (3,707) (2,727) (391) (3,118)
Profit for the year - - - 8,220 8,220 428 8,648
Retirement benefit actuarial loss - - - (1,092) (1,092) - (1,092)
Foreign exchange differences - - (82) - (82) - (82)
Total comprehensive income for the year - - (82) 7,128 7,046 428 7,474
At 31 December 2020 315 16,429 1,977 13,469 32,190 858 33,048
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
£000 £000
Cashflows from operating activities
Profit after tax 12,904 8,648
Adjustments for:
Financial instruments measured at fair value:
Hedging contracts (190) 72
Share-based payments 635 317
Depreciation of property, plant and equipment 1,039 926
Depreciation of right-of-use leased assets 1,066 935
Amortisation of acquired intangible assets 2,638 3,179
Amortisation of internally generated intangible assets 11 -
Profit on disposal of property, plant and equipment (37) (4)
Interest income (2) (14)
Interest expense 516 464
Interest payable on right-of-use lease liabilities 197 190
Retirement benefit obligation net finance cost 48 53
Contributions to defined benefit plans (574) (236)
Tax expense recognised in Consolidated Statement of Comprehensive Income 1,956 825
Decrease/(increase) in inventories (1,548) 1,099
(Increase)/decrease in trade and other receivables (2,806) (1,232)
(Decrease)/increase in trade and other payables 3,726 (598)
Cash generated from operations 19,579 14,624
Tax paid (2,180) (2,377)
Net cash from operating activities 17,399 12,247
Cashflows from investing activities
Paid on acquisition of subsidiaries - (8,857)
Payment of deferred consideration - (3,922)
Gross cash inherited on acquisition - 1,363
Acquisition of subsidiaries, net of cash acquired - (11,416)
Purchase of property, plant and equipment (2,652) (1,268)
Capitalised development costs (796) -
Proceeds on disposal of property, plant and equipment 74 14
Interest received 2 14
Net cash used in investing activities (3,372) (12,656)
Cashflows from financing activities
Proceeds from issue of share capital 239 980
Purchase of own shares for Company reward scheme (53) -
Finance costs paid (516) (468)
Repayments of borrowings* (4,207) (7,857)
Repayment of subordinated loan notes - (190)
Repayments of right-of-use lease liabilities (1,164) (1,108)
Proceeds from bank loans* - 14,816
Equity dividends paid (3,630) (3,231)
Share repurchase - non-controlling interest in subsidiary (1,833) (1,071)
Net cash used in financing activities (11,164) 1,871
Net change in cash and cash equivalents 2,863 1,462
Cash and cash equivalents at the start of the year 15,523 14,123
Exchange movements 22 (62)
Cash and cash equivalents at the end of the year 18,408 15,523
* On 25 May 2021, £19.0 million of outstanding loans were repaid and
simultaneously reborrowed as the Group renewed its banking facilities. On 29
June 2020, £5.0 million was borrowed as a working capital buffer, and was
subsequently repaid in December 2020.
NOTES TO THE FINAL RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
1. Earnings per share
Note 2021 2020
£000 £000
Profit attributable to owners of the parent
Adjusted profit 15,027 11,108
Adjusting items 3 (2,345) (2,888)
Profit for the year 12,682 8,220
Pence Pence
Earnings per share - adjusted
Basic 238.1 177.2
Diluted 234.9 173.9
Earnings per share - total
Basic 201.0 131.1
Diluted 198.2 128.7
Number Number
Issued Ordinary shares at the start of the year 6,299,163 6,226,291
Movement in Ordinary shares during the year 19,252 72,872
Issued Ordinary shares at the end of the year 6,318,415 6,299,163
Weighted average number of shares in issue 6,310,608 6,269,437
Dilutive effect of share options 87,786 117,551
Weighted average shares in issue on a diluted basis 6,398,394 6,386,988
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.
NOTES TO THE FINAL RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
2. Segmental analysis
For the year ended 31 December 2021 Note Materials Vacuum Unallocated Total
Sciences £000 items £000
£000 £000
Revenue 40,716 50,573 - 91,289
Operating costs (33,251) (35,531) (3,730) (72,512)
Adjusted operating profit 7,465 15,042 (3,730) 18,777
Adjusting items 3 (3,158)
Operating profit 15,619
Net interest expense (759)
Profit before tax 14,860
Income tax charge (2,061)
Profit for the year 12,799
For the year ended 31 December 2020 Note Materials Vacuum Unallocated Total
Sciences £000 items £000
£000 £000
Revenue 33,210 46,655 - 79,865
Operating costs (28,341) (34,564) (2,603) (65,508)
Adjusted operating profit 4,869 12,091 (2,603) 14,357
Adjusting items 3 (4,191)
Operating profit 10,166
Net interest expense (693)
Profit before tax 9,473
Income tax charge (825)
Profit for the year 8,648
Unallocated items relate to the Group's head office costs.
Segment assets and liabilities
At 31 December 2021 Materials Vacuum Unallocated Total
Sciences £000 items £000
£000 £000
Assets 27,087 35,671 26,219 88,977
Liabilities (13,423) (11,873) (20,287) (45,583)
Net assets 13,664 23,798 5,932 43,394
Capital expenditure 384 2,253 15 2,652
Depreciation of property, plant and equipment 362 624 53 1,039
Depreciation of right-of-use leased assets 536 474 56 1,066
Amortisation of acquired intangible assets 1,070 1,568 - 2,638
At 31 December 2020 Materials Vacuum Unallocated Total
Sciences £000 items £000
£000 £000
Assets 23,566 31,713 26,747 82,026
Liabilities (11,468) (11,702) (25,808) (48,978)
Net assets 12,098 20,011 939 33,048
Capital expenditure 355 902 11 1,268
Depreciation of property, plant and equipment 285 591 50 926
Depreciation of right-of-use leased assets 465 413 57 935
Amortisation of acquired intangible assets 1,345 1,834 - 3,179
Unallocated items are borrowings, intangible assets and goodwill arising on
acquisition, deferred tax, defined benefit obligations and parent company net
assets. There are no material assets outside the UK.
NOTES TO THE FINAL RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
2. Segmental analysis (continued)
Analysis of revenue by geographical areas
Revenue Non-current assets
Geographic analysis Year to Year to Year to Year to
31 December 31 December 31 December 31 December
2021 2020 2021 2020
£000 £000 £000 £000
UK (domicile) 14,776 10,167 38,862 39,288
Rest of Europe 29,488 24,784 - -
North America 20,034 17,289 217 290
China/Hong Kong 11,103 13,721 - -
Rest of the World 15,888 13,904 - -
91,289 79,865 39,079 39,578
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
2021 2020
£000 £000
Sale of goods, recognised at a point in time 87,622 77,316
Sale of services, recognised at a point in time 3,259 2,338
Sale of services, recognised over time 408 211
91,289 79,865
No customer makes up more than 10% of the Group's revenues.
3. Adjusting items
2021 2020
£000 £000
Amortisation of acquired intangible assets 2,638 3,179
Financial instruments measured at fair value: hedging contracts (190) 72
Share-based payments 635 317
Employment taxes arising from share-based payments 90 64
Acquisition costs (15) 559
Total adjusting items in operating profit 3,158 4,191
Retirement benefits obligation net interest cost 48 53
Total adjusting items 3,206 4,244
Taxation (797) (1,204)
Total adjusting items net of tax 2,409 3,040
Attributable to:
Owners of the parent 2,345 2,888
Non-controlling interest 64 152
2,409 3,040
NOTES TO THE FINAL RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
4. Other intangible assets
Internally generated development costs Acquired Acquired Acquired Acquired Acquired Total
£000 distribution technology sales order brand and customer £000
agreements £000 backlog domain relationships
£000 £000 names £000
£000
Gross carrying amount
1 January 2020 - 3,784 10,539 4,907 12,774 9,080 41,084
Acquisitions - - 2,100 500 830 2,200 5,630
31 December 2020 - 3,784 12,639 5,407 13,604 11,280 46,714
Additions 796 - - - - - 796
31 December 2021 796 3,784 12,639 5,407 13,604 11,280 47,510
Amortisation
1 January 2020 - 3,384 8,612 4,788 11,266 8,576 36,626
Charge for the year - 208 1,057 586 772 556 3,179
31 December 2020 - 3,592 9,669 5,374 12,038 9,132 39,805
Charge for the year 11 100 964 33 648 893 2,649
31 December 2021 11 3,692 10,633 5,407 12,686 10,025 42,454
Carrying amount
At 31 December 2021 785 92 2,006 - 918 1,255 5,056
At 31 December 2020 - 192 2,970 33 1,566 2,148 6,909
At 31 December 2019 - 400 1,927 119 1,508 504 4,458
5. Borrowings and net debt
Borrowings mature as follows:
31 December 2021 Bank loans
£000
Repayable in less than six months 2,504
Repayable in months seven to twelve 2,481
Current portion of long-term borrowings 4,985
Repayable in years one to five 12,810
Total borrowings 17,795
Less: interest included above (787)
Less: cash and cash equivalents (18,408)
Total net cash (1,400)
31 December 2020 Bank loans
£000
Repayable in less than six months 2,115
Repayable in months seven to twelve 2,100
Current portion of long-term borrowings 4,215
Repayable in years one to five 17,704
Total borrowings 21,919
Less: interest included above (704)
Less: cash and cash equivalents (15,523)
Total net debt 5,692
NOTES TO THE FINAL RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
6. Acquisitions
Increased shareholding in Bordeaux Acquisition Limited
On 16 February 2021, Judges acquired 12.5% of the shares in Bordeaux
Acquisition Limited for a cash consideration of £1.8 million, increasing its
shareholding from 75.5% to 88%. The transaction was financed from Judges'
existing cash resources.
Acquisitions of Heath Scientific Company Limited and Korvus Technology Limited
No changes were made to the provisional acquisition accounting as presented in
the 2020 Annual Report and Accounts.
7. Dividends
2021 2020
Pence £000 Pence £000
per share per share
Final dividend for the previous year 38.5 2,430 35.0 2,195
Interim dividend for the current year 19.0 1,200 16.5 1,036
Total final and interim dividend 57.5 3,630 51.5 3,231
The Directors will propose a final dividend of 47.0p per share, amounting to
£2,970,000, for payment on 8 July 2022. 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.
8. Final Results Announcement
This final results announcement, which has been agreed with the auditors, was
approved by the Board of Directors on 22 March 2022. It is not the Group's
statutory accounts. Copies of the Group's audited statutory accounts for the
year ended 31 December 2021 will be available at the Company's website,
www.judges.uk.com (http://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 2021 and 31 December 2020
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 2020 have
been delivered to the Registrar of Companies, but the 31 December 2021
accounts have not yet been filed.
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