Judges Scientific plc AIM:JDG UHV Design 2011 Quorum 2014 - - PowerPoint PPT Presentation

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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


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UHV Design 2011 GDS 2011 Quorum 2014 Scientifica 2012 Scientifica 2014

Judges Scientific plc

AIM:JDG

19 September 2017

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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

  • ther persons as to the fairness, accuracy or completeness of the information or estimates or opinions or other statements about the future prospects of the Company or any of its

respective businesses contained in the Materials or referred to in the presentation given in connection therewith and no responsibility, liability or duty of care whatsoever is accepted by any such person in relation to any such information, projection, forecast, opinion, estimate or statement. Members of the public are not eligible to take part in the presentation or be provided with the Materials. In the United Kingdom, the Materials are only being directed at persons (i) reasonably believed by the Company to be investment professionals within the meaning of paragraph (5) of Article 19 or to high net worth companies or unincorporated associations within the meaning of paragraph (2) of Article 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529), as amended and (ii) who are “qualified investors” within the meaning of section 86(7) of FSMA or otherwise in circumstances that will not have resulted and will not result in an offer of transferable securities to the public in the United Kingdom within the meaning of section 102B of FSMA. The investment or investment activity to which the Materials relate are available only to such persons and will be engaged with only with such persons. If you are not such a person (i) you should not take part in the presentation and nor should you have received the Materials, (ii) please return this document to the Company’s registered office or representative at the presentation as soon as possible and take no other action, (iii) please leave the presentation immediately after returning the Materials and (iv) you may not rely on or act upon the matters communicated by the Materials. This presentation and the information contained herein are not for publication or distribution in the United States (within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act")). The securities offered by the Company have not been and will not be registered under the Securities Act or any state securities laws in the United States. The securities may not be offered or sold in the United States or to or for the account or benefit of U.S. Persons (as defined in regulation S) except that the securities may be offered or sold to persons who are "qualified institutional buyers" (as defined under Rule 144A under the Securities Act) in reliance on exemption from the Securities Act provided by Rule 144A and otherwise in accordance with the applicable laws of any US State. Offers and sales to non-US Persons will be made only in "offshore transactions" in reliance on Regulation S. Neither this presentation nor any copy of it or any of the Materials may be taken or transmitted into or distributed in Canada, Australia, or the Republic of South Africa or to any resident thereof, or (iv) taken or transmitted into or distributed in Japan or to any resident thereof. Any failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction. The distribution of this document in other jurisdictions may be restricted by law and the persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. The Materials are being made available on the basis that the recipients keep confidential any information contained therein, whether orally or in writing, in connection with the

  • Company. The Materials are confidential and must not be copied, reproduced, published, distributed, disclosed or passed to any other person at any time without the prior written

consent of the Company. This presentation contains forward looking statements. These forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events. These forward-looking statements are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. This presentation is intended for informational purposes and does not constitute an offer to sell securities in any jurisdiction.

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SLIDE 3

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

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SLIDE 4

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

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SLIDE 5

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

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SLIDE 6
  • 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

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  • 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

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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

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Positive growth

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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

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SLIDE 10

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

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SLIDE 12

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)

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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)

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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

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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

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SLIDE 16

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

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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

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Sircal

  • Purchased in 2010
  • Instruments to purify noble

gases

  • Used in Arc-Spark

spectrometry to analyse metals

  • Driven by global growth and

regulation

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Global Digital Systems (GDS)

  • Acquired March 2012
  • Geotechnical instruments
  • Measure mechanical properties
  • f soil and rock
  • Largely universities but

increasing sales to commercial sector

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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

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Quorum

  • Purchased in 2009
  • Instruments used to prepare

samples for electron microscopy

  • Universities, bioscience,

semiconductors

  • Driven by growth in education

and life sciences

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SLIDE 29

Deben

  • 51% purchased March 2011
  • KE added in 2012
  • Management stayed on with 49%
  • Accessories used in electron

microscopy

  • Universities and electron

microscope OEMs

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SLIDE 30

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

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SLIDE 31

Armfield

  • Acquired in Jan 2015
  • Educational instruments for

undergraduate students

  • R&D instruments for commercial food

and drinks industry

  • Worldwide agents network

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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

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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

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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

Judges Scientific plc

AIM:JDG