Full year results year ended 31 December 2017 David Cicurel, CEO - - PowerPoint PPT Presentation

Full year results

year ended 31 December 2017 David Cicurel, CEO Brad Ormsby, CFO

20th 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

– Buying sustainable businesses at sensible prices

2

Long term drivers Low capital use Large deal pool Shareholder value

The Judges Group

2005 2006 2009 2010 2011 2012 2013 2015 2016 2017 Fire Testing Technology PE.fiberoptics UHV Design Aitchee Engineering Quorum Technologies Sircal Instruments Deben KE Developments GDS Instruments Scientifica Armfield CoolLED FIRE Dia-Stron EWB Solutions Oxford Cryosystems

3

Key Messages

Strong financial performance

Strong order intake Sterling weakness

Continued execution of strategy

Acquisition of Oxford Cryo Appointment of COO Investment in R&D

Positive outlook

Robust opening order book YTD intake satisfactory Sterling?

4

Performance in the period

6

Highlights

6 Record revenues

+24.6%

£71.4 million Organic growth 17.7%

Organic order intake

+16%

Total order book 14.9 weeks (2016: £0.7 billion)

Adjusted operating profit

+53%

£10.9 million (2016: £11.6 million)

Adjusted EPS

+56%

131.9p (2016: 61%)

2017 2016 2017 2016 2017 2016 2017 2016

Cash from

• perations

£10.9m

(2016: £6.2m)

(2016: £2.7 million)

Final dividend

+16%

Full year: 32p

(2016: £2.4 million)

Adjusted net debt

£8.0m

(2016: £9.9m)

(2016: £10.5illion)

Cash balance

£10.7m

(2016: £7.9m)

2017 2016 2017 2016 2017 2016 2017 2016

Performance

Organic revenue up 17.7% plus acquisitions Organic EBITA contribution up 50% Adjusting items mainly amortisation and acquisition transaction fees

2017 (£m) 2016 (£m) Variance (£m) Variance (%) Revenue 71.4 57.3 14.1 24.6% Operating costs (60.5) (50.2) (10.3) 20.5% Adjusted operating profit 10.9 7.1 3.8 53% Interest (0.5) (0.5) Adjusted PBT 10.4 6.6 3.8 57.6% Taxation (1.5) (0.8) Adjusted PAT 8.9 5.8 3.1 53.4% Adjusting items (post tax) (4.2) (5.1) Statutory PAT 4.7 0.7 4.0

7 Effective tax rate 14% due to R&D tax credits; Higher than 2016 due to better US performance

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

2018 YTD intake satisfactory

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Group (17 wks * 3) Group (ttm) Group (budget)

8

Revenue summary

• Revenue growth of 25% to £71.4m
• Like for like sales growth of 17.7%
• Organic growth across US, EU, China and ROW
• UK down reflecting Brexit research funding uncertainties
• 85+% of revenues exported

9 2017 revenue

H1 H2

2016 revenue

H1 H2

2015 revenue

H1 H2

2017 EPS

H1 H2

2016 EPS

H1 H2

2015 EPS

H1 H2

13% 26% 28% 12% 21% 14% 26% 26% 10% 24% 15% 24% 27% 11% 23% 13% 25% 26% 11% 25%

Revenue Orders 2016 2017

Profit bridge

2,000 4,000 6,000 8,000 10,000 12,000 14,000 2016 contribution Demand recovery Production recovery Organic growth Organic decline Acquisitions 2017 contribution

£000s

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Balance sheet and cash flow

100% cash conversion of operating profit Focus on debt repayment Increasing dividend returns

Cashflow 2017 (£m) 2016 (£m) Adjusted EBITDA 11.6 7.7 Working capital movements (0.5) (0.8) Share based payments 0.3 0.2 DB pension contributions (0.2) (0.2) Exceptional transaction fees (0.3) (0.7) Cash generated from ops 10.9 6.2 Tax 0.1 (1.1) Capex (inc acquisitions) (7.9) (7.2) Interest payments (0.5) (0.5) Repayment of borrowings (2.7) (3.9) Proceeds from bank loans 4.5 7.5 Dividends (1.7) (1.6) Issue of shares 0.1 0.0 Movement in cash 2.8 (0.6)

11 Reduction in working capital as production issues subside Armfield DB pension – triennial valuation in 2017 Reduced net debt as 2017 acquisitions covered fully by cash generation

Balance Sheet Dec 17 (£m) Dec 16 (£m) Cash 10.9 7.9 Debt (18.9) (17.8) Adjusted net debt (8.0) (9.9) Minority debt (0.1) (0.1) Working Capital 7.5 8.3 DB Pension (1.8) (1.8) Other assets / liabilities 28.2 26.2 Net assets 25.8 22.7

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Return On Total Invested Capital Return on Total Invested Capital

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

ROTIC (Trailing 12 months)*

GDS March 2012 Scientifica June 2013 FTT acquisition Armfield January 2015

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*excludes central costs and properties

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Diversification

Group revenue by geography

UK Rest of Europe North America Rest of World

Group revenue

FTT Sircal Aitchee GDS PFO Armfield DiaStron Quorum UHV EWB Deben Oxford Scientifica CoolLED 13

12½ Year Financial History

Focus on debt repayment

Financial history

• 20.0

40.0 60.0 80.0 100.0 120.0 140.0

• 5

10 15 20 25 30 35 2007 2009 2011 2013 2015 2017

• 10,000

20,000 30,000 40,000 50,000 60,000 70,000 80,000

• 2,000

4,000 6,000 8,000 10,000 12,000 2007 2009 2011 2013 2015 2017

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 2007 2009 2011 2013 2015 2017 £'000

Annual debt repaid + dividends paid from cashflow

Dividends Repayment of borrowings

CAGR 9.5% for past 10 years

EPS and Dividends Revenue and profit

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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

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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

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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

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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

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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%

• f equity

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Major shareholders

24

Our businesses

25

Our businesses

26

Our businesses

27

Our businesses

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Our businesses

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