UHV Design 2011 GDS 2011 Quorum 2014 Scientifica 2012 Scientifica 2014
Judges Scientific plc AIM:JDG UHV Design 2011 Quorum 2014 - - PowerPoint PPT Presentation
Judges Scientific plc AIM:JDG UHV Design 2011 Quorum 2014 - - PowerPoint PPT Presentation
Judges Scientific plc AIM:JDG UHV Design 2011 Quorum 2014 Scientifica 2014 Scientifica 2012 GDS 2011 19 September 2017 Disclaimer The document attached hereto and the presentation of which it forms part (together the Materials) have
Disclaimer
The document attached hereto and the presentation of which it forms part (together the “Materials”) have been prepared by Judges Scientific plc (“Judges” or the “Company”) and are confidential and personal to you and the Materials are furnished to you as background information to provide a basis for potential investors to consider whether to pursue an acquisition of shares in the Company and do not constitute an offer or invitation for the sale or purchase of any securities, nor do they, nor do they purport to, set out or refer to all or any of the information an investor might require or expect in making a decision as to whether or not to deal in shares in the Company. The Materials do not constitute and are not a prospectus or listing particulars (under the Financial Services and Markets Act 2000 (“FSMA”) or the Prospectus Rules of the Financial Services Authority) nor do they comprise an AIM admission document for the Rules of AIM operated by the London Stock Exchange plc and should not be construed as such. No representation or warranty or other assurance, express or implied, is made by or on behalf of or the Company or any of their respective directors, officers, employees, advisers or any
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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 Previously CFO of Kalibrate Technologies plc; PwC trained Chartered Accountant David Barnbrook, Chief Operating Officer Chartered Engineer with over 20 years’ senior management experience in industry 3
Owners of 19% of equity
4
Overview
- Group involved in the buy and build of scientific instrument businesses
- Sixteen acquisitions since May 2005; buying sustainable companies at sensible prices
- Continued opportunities for consolidation in fragmented market
- Long-term profitability and cash generation
500 1000 1500 2000 2500
Share performance
LSE: JDG FTSE: ASX
5 Queen’s Awards for design excellence and export
p
H1 2017 Highlights
- Record revenues of £32.7m (H1 2016: £27.3m); 14% organic growth
- Organic order book 16.5 weeks at 1 July 2017 (1 July 2016: 11.2 weeks); HY organic
- rders up 28%
- Adjusted operating profit: £4.6m (H1 2016: £3.2m); up 43%
- Adjusted basic EPS: 54.8p (H1 2016: 33.2p), up 65%
- Cash generated from operations of £4.4m (H1 2016: £2.4m)
- Interim dividend of 10.0p; 11% increase (2016 Interim: 9.0p)
- Adjusted net debt of £5.8m at 30 June 2017 (Dec 2016: £9.9m)
- July 2017 acquisition of Oxford Cryosystems for £4.5m
and 24.5% increase in Bordeaux shareholding to 75.5% 5
- Long term drivers of growth:
– Global higher education – Optimisation
- 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; implement robust financial controls – Support and advice for entity management teams – Repay debt and reinvest in further acquisitions 6
Our Business Model
- 10.0
20.0 30.0 40.0 50.0 60.0 70.0
b c d e f g h i j k l m n
- p
q r s t u v w x y z aa
- 1.0
2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
Revenues £m Profits £m
Revenues and Profits
Revenue £m - half year Revenue £m Adjusted operating profit - half year Adjusted operating profit
12½ Year Financial History
7 Focus on debt repayment
- 20.0
40.0 60.0 80.0 100.0 120.0
b c d e f g h i j k l m n
- p
q r s t u v w x y z aa
- 5.0
10.0 15.0 20.0 25.0 30.0
- Adj. EPS (p)
Dividends (p)
EPS and Dividends
Adjusted EPS - half year Adjusted EPS Dividend Dividend - half year
- 1.0
2.0 3.0 4.0 5.0 6.0 7.0 £'m
Annual debt repaid + dividends paid from cashflow
Dividends Repayment of borrowings
H1
CAGR 8.6% for past 9 years
Operational results drivers
- Organic revenue
– public sector funding – foreign exchange rates – macroeconomic environment
- Cost
– high fixed cost base – investment in R&D – impact of production issues ongoing
- Other
– impact of oil/commodity prices alleviating 8
Positive growth
9
1,000 2,000 3,000 4,000 5,000 6,000 2016 H1 contribution Organic growth Organic fall Acquisitions 2017 H1 contribution
£000s
Profit bridge
H1 2017 H1 2016 Variance Variance £m £m £m % Revenue 32.7 27.3 5.4 20.0% Operating costs (28.1) (24.1) (4.0) 16.9% Adjusted operating profit 4.6 3.2 1.4 43.3% Interest (0.2) (0.2) Adjusted PBT 4.4 3.0 1.4 48.5% Taxation (0.7) (0.6) Adjusted PAT 3.7 2.4 1.3 57.3% Adjusting items (post tax) (1.9) (3.1) Statutory PAT 1.8 (0.7) 2.5
Performance
Organic revenue up 14%; improvements in most businesses Organic EBITA contribution up 40% Adjusting items predominantly amortisation and acquisition transaction fees
- Recovery in H1 2017 of businesses impacted by low demand last year
- Interim tax rate of 15% (H1 2016: 20%) reflecting expected full year rate
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Revenue summary
- Record revenues of £32.7m up £5.4m
- 80+% of sales exported
- 14% like for like sales growth
- Organic growth in China, EU and USA
- Organic UK sales down by 25%, possibly
reflecting Brexit
- ROW sales have bounced back from 2016
– Armfield – China
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UK Europe North America Rest of the world
- 4,000
8,000 12,000 16,000
Total sales
Sales 2016 Sales 2017
- 40.0%
- 20.0%
0.0% 20.0% 40.0% 60.0%
Organic sales 2017
£’000
Order Intake
- H1 2017 Organic order intake 28% ahead of H1 2016; positive order
intake through H1
- Organic order book at 1 July 2017: 16.5 weeks (1 July 2016: 11.2 weeks)
- 2016 acquisitions performing as expected
- Total order book 15.4 weeks at 1 July 2017
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Q3 to date in line with Q2 2017
10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Group (17 wks * 3) Group (ttm) Group (budget)
Summary Balance Sheet and Cashflows
Working capital still higher than optimal Armfield DB pension – consistent with Dec 16 Positive cash generation Focus continues to reduce debt Increasing dividend returns for shareholders
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Balance Sheet Jun-17 Dec-16 £m £m Cash 8.9 7.9 Bank debt (14.7) (17.8) Adjusted net debt (5.8) (9.9) Subordinated debt (0.4) (0.4) Working capital 8.0 8.3 DB Pension (net) (1.6) (1.8) Other assets/liabilities 24.7 26.5 Net assets 24.9 22.7
Net debt reduced due to cash performance plus no acquisitions in H1
Cashflow H1 2017 H1 2016 £m £m Adjusted EBITDA 4.9 3.5 Working capital movements (0.6) (0.6) Share based payments 0.1 0.1 Exceptional transaction fees
- (0.6)
Cash generated from operations 4.4 2.4 Tax 0.2 (0.5) Capex (inc acquisitions) (1.9) (6.0) Interest payments (0.2) (0.3) Repayment of borrowings (1.5) (2.7) Proceeds from bank loans
- 5.5
Dividends
- (1.0)
Issue of shares
- Movement in cash
1.0 (2.6)
Return On Total Invested Capital
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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 acquisition March 2012 Scientifica June 2013 FTT acquisition Armfield January 2015
H1 Segmental split
Material sciences
50% of Group revenue 58% of operating profit contribution
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FTT (inc FIRE) Sircal PFO GDS Armfield Dia-Stron
Revenue
Vacuum
50% of Group revenue 42% of operating profit contribution
- Business acquired (July 2017):
Oxford Cryosystems: Cryocooling systems for x-ray crystallography
Quorum UHV EWB Scientifica CoolLED Deben
Revenue
Oxford Cryosystems acquisition
- Market-leading Cryocooling systems for x-ray crystallography
- £4.3m revenues and £0.90m operating profit
- Acquired by subsidiary vehicle, Bordeaux, in July 2017
- Total consideration of £4.5m cash plus potential £1.6m earn-out
- Financed by £4.5m new 5 year bank loan for Bordeaux
- Management team remain
- Simultaneously increased Bordeaux stake from 51% to 75.5% for £1.3m cash
- Both transactions earnings-enhancing
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Acquisitions overview
- Fragmented market with over 2,000 privately held businesses in the UK
- Large pool of potential acquisitions; Judges is highly selective
- Judges has a strong reputation for being a good acquirer:
– Trusted to honour the terms agreed – Trusted to act quickly with secured funding – Treats vendors and staff with respect – No micromanagement post-acquisition
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Investment case
- Robust business model; pursued with discipline
- Strong long-term growth drivers in higher education and optimisation
- Management focused on shareholder value - cash generation, debt
repayment, dividend growth and return on capital
- Every acquisition is earnings enhancing; large pool of targets
- Dividend growth of 10+% for past 12 years
- Inheritance tax free shareholding after 2 years
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Q & A
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Appendices
- Capital structure
- Trading businesses
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Capital Structure
Listing & Ticker: AIM : JDG Ordinary Shares Issued (31.08.17): 6,120,628 Last price (11.09.17): 1912.5p Market Capitalisation (11.09.17): £117.1m Major shareholders:
15.0% - David Cicurel 3.5% - Other directors 12.7% - Liontrust Asset Management 4.7% - Amiral Gestion 4.9% - FTT Vendors 4.2% - Polar Capital 4.1% - Guy Naggar 3.8% - Julius Baer 3.1% - Brown Shipley 2.6% - NFU Mutual 2.6% - Banque de Luxembourg 2.4% - Hargreaves Lansdown 1.7% - Allianz Asset Management AG 1.7% - Artemis Asset Management Ltd
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Trading businesses
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Fire Testing Technology (FTT)
- Purchased in 2005
- Instruments measure
materials’ reaction to fire
- World leader
- Driven by safety, regulation,
globalisation
23
PE.fiberoptics (PFO)
- Judges backed MBO in 2005;
51% holding
- PerkinElmer closed it when the
internet bubble burst
- Management remain
- Instruments measure behaviour
- f light in fibre (telecom)
- Driven by growth of the internet
24
Sircal
- Purchased in 2010
- Instruments to purify noble
gases
- Used in Arc-Spark
spectrometry to analyse metals
- Driven by global growth and
regulation
25
Global Digital Systems (GDS)
- Acquired March 2012
- Geotechnical instruments
- Measure mechanical properties
- f soil and rock
- Largely universities but
increasing sales to commercial sector
26
UHV Design
- Purchased in 2006
- Instruments move, heat and cool
- bjects under Ultra High Vacuum
- Universities, science projects, some
manufacturing
- Driven by growth in science and
education
27
Quorum
- Purchased in 2009
- Instruments used to prepare
samples for electron microscopy
- Universities, bioscience,
semiconductors
- Driven by growth in education
and life sciences
28
Deben
- 51% purchased March 2011
- KE added in 2012
- Management stayed on with 49%
- Accessories used in electron
microscopy
- Universities and electron
microscope OEMs
29
Scientifica
- Purchased in 2013
- Electrophysiology and imaging
- Systems used in neuroscience research
- Driven by efforts to find cures for
degenerative conditions
- Universities & research centres in US, UK
and elsewhere
30
Armfield
- Acquired in Jan 2015
- Educational instruments for
undergraduate students
- R&D instruments for commercial food
and drinks industry
- Worldwide agents network
31
CoolLED
- Purchased in February 2016
- LED illumination sources for
fluorescence microscopy
- Replacement for outdated
mercury lamps
- Universities & research
centres in US, UK and elsewhere
- Management team remaining
32
Dia-Stron
- Purchased in April 2016
- Tests the mechanical
properties of fibres
- Strong market position in
human hair testing
- Mainly commercial sales to
blue-chip personal care companies
33
EWB
- Acquired in November 2016
- Designs and manufactures
edge-welded bellow
- Integrated into UHV systems,
aerospace, industrial devices
- Mainly bespoke, repetitive
sales to OEMs
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UHV Design 2011 GDS 2011 Quorum 2014 Scientifica 2012 Scientifica 2014