Full Year results Year ended 31 December 2019 David Cicurel, CEO - - PowerPoint PPT Presentation

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Full Year results Year ended 31 December 2019 David Cicurel, CEO - - PowerPoint PPT Presentation

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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

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Full Year results

Year ended 31 December 2019 David Cicurel, CEO Brad Ormsby, CFO

18th March 2020

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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

– Buying sustainable businesses at sensible prices

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Long term drivers Low capital use Large deal pool Shareholder value

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SLIDE 3

The Judges Group

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USA

Moorfield Nanotechnology

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

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SLIDE 4

Universities Industry Other research and compliance

A snapshot of Group customers

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OEMs

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SLIDE 5

Key Messages

Record financial performance

Growth across all financial metrics Favourable FX 25% increase in annual dividend

Organic growth

Growth driven organically and via operational excellence Continued R&D investment Benefiting from diversification by geography and markets

2020 outlook

Slower start to the year Uncertainty regarding Covid-19

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SLIDE 6

Performance review

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Record revenues

+5.9%

£82.5 million

Organic order intake

+3.3%

Total order book 13.6 weeks (2016: £0.7 billion)

Adjusted operating profit

+18%

£17.4 million (2016: £11.6 million)

Adjusted EPS

+21%

222.5p (2016: 61%)

2018 2017 2018 2017 2018 2017

Highlights

7 Cash from

  • perations

£19.1m

(2018: £15.7m)

(2016: £2.7 million)

Annual dividend

+25%

50p per share

(2016: £

Adjusted net debt

£2.0m

(31 Dec 2018: £0.9m net cash)

(2016: £10.5illion)

Cash balance

£14.1m

(31 Dec 2018: £15.7m)

2018 2017 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018

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Performance

Revenue up 6% - order book growth and operational improvements Minimal impact from new IFRS 16 standard Adjusting items mainly amortisation from previous acquisitions 8 Effective tax rate 14.7% mainly due to R&D tax credits

FY 2019 (£m) FY 2018 (£m) Variance (£m) Variance (%) Revenue 82.5 77.9 4.6 6% Operating costs (65.1) (63.2) 1.9 3% Adjusted operating profit 17.4 14.7 2.7 18% Interest (0.4) (0.4) Adjusted PBT 17.0 14.3 2.7 19% Taxation (2.5) (2.2) Adjusted PAT 14.5 12.1 2.5 21% Adjusting items (post tax) (2.6) (3.0) Statutory PAT 11.9 9.1 2.8 30%

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Order intake

  • Organic order intake up 3.3%

compared with 2018

  • Healthy but uneven intake
  • 1 Jan 2020 Order book of 13.2

weeks (1 January 2019: 14.4 weeks) – actual amount equivalent

  • First 10 weeks of 2020 below

budget level

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10 20 30 40 50 60 70 80 90 100 Millions

Last 17 weeks annualised Trailing 12 months Budget

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Revenue summary

  • Organic growth across:

– North America up 17% – China/Hong Kong up 23%

  • UK receded 10%, Brexit related?
  • Europe and Rest of the World

remained flat

10 Revenue Orders 2018 2019

85+% of revenues exported Origin of orders and revenue by geography

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SLIDE 11

Profit bridge

5,000 10,000 15,000 20,000 25,000 2018 contribution* Organic growth Organic decline Acquisition 2019 contribution*

£000s

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*Contribution is EBIT from trading subsidiaries before central costs

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SLIDE 12

Balance sheet and cash flow

110% cash conversion of operating profit – under old IFRS would have been 105%

Cashflow 2019 (£m) 2018 (£m) Adjusted EBIT 17.4 14.7 Depreciation (PPE) 0.8 0.8 Depreciation (IFRS 16 R-o-U) 0.9

  • DB pension contributions

(0.2) (0.2) Exceptional transaction costs (0.3)

  • Working capital movements

0.5 0.4 Cash generated from ops 19.1 15.7 Tax (2.2) (2.4) Interest paid (inc. IFRS R-o-U) (0.3) (0.5) IFRS 16 lease repayment (0.9)

  • Capex (inc acquisitions)

(1.9) (3.1) Drawdown of bank loans 2.3

  • Repayment of borrowings

(2.9) (3.2) Dividends (annual) (2.7) (2.1) Dividends (special) (12.4)

  • Issue of shares

0.3 0.6 Movement in cash (1.6) 5.0

12 Minimal net debt despite special dividend and acquisition in December 2019 Armfield DB pension liability increased with reduced discount rate Working capital <10% of revenue

Balance Sheet Dec 19 (£m) Dec 18 (£m) Cash 14.1 15.7 Debt (16.1) (14.8) Adjusted net (debt)/cash (2.0) 0.9 Minority debt (0.1) (0.1) Working Capital 6.9 7.5 DB Pension (net of tax) (1.7) (1.5) Other assets / liabilities 25.5 24.4 Net assets 28.6 31.2

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Return On Total Invested Capital Return on Total Invested Capital

0% 10% 20% 30% 40% 50%

GDS March 2012 Scientifica June 2013 FTT acquisition Armfield January 2015

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*excludes central costs and properties

ROTIC (Trailing 12 months)*

2019: 31.4% Moorfield December 2019

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Diversification

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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

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12½ Year Financial History

Focus on cash generation

Financial history

COAGR 8.9% for past 12 years

EPS and Dividends Revenue and profit

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Cash generation 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 5000 10000 15000 20000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Revenue Operating Profit total

0.0 50.0 100.0 150.0 200.0 250.0 20 40 60 80 100 120 140 160 180 200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Adjusted Earnings per Share FY dividend per share

5000 10000 15000 20000 25000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

FY cash generation Dividend*

*excludes £12.4m special dividend in 2019

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Strategy for growth

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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

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Acquisitions

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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

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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%

20 Financial certainty for seller Long deal incubation period Honourable in process Crystallisation notoriously erratic

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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

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…. Whilst maintaining autonomy

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Outlook and investment case

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Outlook

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Order intake slower than 2019 Covid-19 uncertainty Confident in business model

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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

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Appendices

  • Management team
  • Major shareholders
  • Trading businesses
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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%

  • f equity

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Major shareholders

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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%

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Our businesses

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Our businesses

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Our businesses

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Our businesses

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Our businesses

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Our businesses

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