Final Results

RNS Number : 8543D

Judges Scientific PLC

30 March 2011

 



30 March 2011

Judges Scientific plc

('Judges Scientific,' the 'Company' or the 'Group')

PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

JUDGES SCIENTIFIC REPORTS RECORD RESULTS FOR 2010

 Highlights:

·    Record basic earnings per share, excluding exceptional items, of 45p (2009: 28p); including exceptional items 8.1p (2009: 20.6p)

·    Proposed final dividend of 5p, making a total distribution for the year of 7.5p (2009: 5p)

·    75% increase in pre-tax profit to a record £2.75 million (2009: £1.57 million) before amortisation of intangible assets, other exceptional items, tax and non-controlling interests

·    Record revenues of £16 million compared with £11.3 million in 2009 (up 14% like-for-like)

·    Cash in hand of £2.5 million as at 31 December 2010; net debt of £0.8 million (2009 adjusted: £1 million) despite the cash acquisition of Sircal

·    51% of Deben acquired 18 March 2011

 Alex Hambro, Chairman of Judges Scientific, commented:

"Thanks to a strong full-year performance from Quorum, a healthy maiden contribution from Sircal and good progress across its other businesses, the Group achieved another record trading result in 2010. The current financial year has started with a solid order book, a strong balance sheet and the enhancement of our position in electron microscopy through the acquisition of a 51% interest in Deben. Against this background your Board is pleased to recommend a 50% increase in the total dividend distribution to 7.5p for 2010."

Chairman's Statement

I am delighted to report an excellent set of preliminary results for the year to 31 December 2010. Revenues advanced 42% to £16 million compared with £11.3 million in 2009 (organic growth, excluding Quorum's and Sircal's revenues for both years, was 14%). Profit before tax and minorities, adjusted to exclude amortisation of intangible assets and other exceptional items, rose by 75% from £1.57 million in 2009 to a record £2.75 million in 2010 (the operating contribution of the businesses owned on 1 January 2009 grew by 12%). Basic earnings per share, similarly adjusted, rose from 28p to 45p.

Exceptional items include amortisation of intangible assets and, for the first time, acquisition expenses. They also reflect the difference in valuation, from one year-end to the next, of the convertible redeemable shares; the strong increase in the Company's share price during the year resulted in a sizeable charge which your Board regards as unrelated to the Group's operating performance and which is therefore treated as an exceptional item. Profit including exceptional items but before tax and minorities amounted to £0.67 million (2009: £1.16 million). This equates to basic earnings per share, including exceptional items, of 8.1p (2009: 20.6p).

Corporate activity

On 18 March 2010, the Group acquired Sircal Instruments (UK) Limited, a company which designs, manufactures and sells rare gas purifiers for use in metals analysis. The basic consideration for the purchase was £1 million, payable in cash and financed by an additional bank loan. In its last year as an independent company, Sircal generated adjusted operating profits of £270,000 on sales of £785,000. Following the relocation of the business, with the help of the vendors, to our East Grinstead facility, the company enjoyed growing sales and a solid profit contribution.

On 18 March 2011, the Group acquired a 51% interest in Deben UK Limited, a company based in Suffolk which makes instruments used in electron microscopy. The vendors retain a 49% non-controlling interest in the acquisition vehicle set up for the purpose of the transaction and will continue to manage and expand its activities. This acquisition, viewed in the context of the 2009 purchase of Quorum, gives the Group an increasingly strong presence in the field of electron microscopy. The purchase price in respect of 100% of Deben was £3.26 million, reflecting the company's adjusted operating profit of £707,000 and the £517,000 value of the freehold property from which it operates. To finance the purchase Lloyds Bank provided the acquisition vehicle with a £2.42 million loan, which is guaranteed by Judges. The Company did not issue any shares to finance the transaction.

Trading

The operations of the Group delivered satisfactory results in terms of order intake, sales, margins and cash flow. The year started with a healthy order book and demand remained generally robust in our niches; those of our businesses that are more exposed to the private sector benefited from an improved climate, with the Far East continuing to be an important and growing market. Much effort has been invested in updating and upgrading many of the Group's products.

Quorum had an excellent year; the success of the new sample-coater model, launched in the spring, was reflected in a good flow of orders in this segment of its business, which represents 80% of its turnover. The sample-freezing ("cryo") range is also being replaced by a superior product, a development that will complete the upgrade of almost all of Quorum's product offering during the last two years.

The positive trading performance has enabled the Group to further improve our key performance indicator of Return On Total Invested Capital in 2010 to 45% (2009: 40%).

Financial position

Net debt as at 31 December 2010 stood at £788,000; this compared with £1 million at the previous year-end (adjusted to include the earn-out on the Quorum acquisition that had not been paid as of that date). This decline in net debt was achieved despite the net cash outlay arising on the acquisition of Sircal. As usual, a significant proportion of our debt is denominated in foreign currency to hedge against the impact of exchange rate fluctuations on our export activities. Year-end cash balances amounted to £2.5 million (2009: £2.5 million).

Dividends

Your Board is pleased to recommend a final dividend of 5p per share (2009: 3.7p per share) which, subject to approval at the forthcoming Annual General Meeting on 31 May 2011, will make a total distribution of 7.5p per share for 2010 (2009: 5p per share). Despite the increase, the dividend total is covered 6 times by adjusted earnings per share, similar to 2009.

The proposed final dividend will be payable on 1 July 2011 to shareholders on the register on 3 June 2011 and the shares will go ex-dividend on 1 June 2011. 

Current trading and prospects

The current year has started with a solid order book and a new acquisition. This, together with the enhanced product development focus of recent months, should serve to underpin the Group's performance. The main challenges remain Sterling's burgeoning revival and public sector budget cuts in the developed world. Judges' financial position is robust and the bank remains supportive of the Group's prudent acquisition policy.

Alex Hambro

Chairman

For further information please contact:

David Cicurel, CEO, Judges Scientific:                             Tel: [phone]

Pascal Keane, Shore Capital:                                             Tel: [phone]

 
Melvyn Marckus, Cardew Group:                                        Tel: [phone]

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

				2010				2009
	Notes	Before exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total
		£000	£000	£000		£000	£000	£000
Revenue		16,005	-	16,005		11,295	-	11,295
Operating costs excluding exceptional items		(13,123)	-	(13,123)		(9,613)	-	(9,613)
Operating profit excluding exceptional items		2,882	-	2,882		1,682	-	1,682
Exceptional items
Charge relating to derivative financial instruments		-	(1,752)	(1,752)		-	-	-
Amortisation of intangible assets		-	(254)	(254)		-	(415)	(415)
Acquisition costs		-	(77)	(77)		-	-	-
Operating profit/(loss)		2,882	(2,083)	799		1,682	(415)	1,267
Interest receivable		7	-	7		3	-	3
Interest payable		(137)	-	(137)		(110)	-	(110)
Profit/(loss) before tax		2,752	(2,083)	669		1,575	(415)	1,160
Taxation		(725)	556	(169)		(441)	116	(325)
Profit/(loss) and total comprehensive income for the year		2,027	(1,527)	500		1,134	(299)	835
Attributable to:
Equity holders of the parent company		1,860	(1,527)	333		1,131	(299)	832
Non-controlling interest		167	-	167		3	-	3
Earnings per share - total and continuing
Basic	1	45.0p	-	8.1p		28.0p	-	20.6p
Diluted	1	41.0p	-	7.8p		27.3p	-	20.1p

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2010

		2010		2009
	Note	£000		£000
ASSETS
Non-current assets
Property, plant and equipment		956		921
Goodwill		5,290		4,497
Other intangible assets		419		594
Deferred tax asset		348		-
		7,013		6,012
Current assets
Inventories		1,923		1,241
Trade and other receivables		2,515		1,803
Cash and cash equivalents		2,542		2,540
		6,980		5,584
Total assets		13,993		11,596
LIABILITIES
Current liabilities
Trade and other payables		(2,730)		(2,197)
Derivative financial instruments		(1,752)		-
Current portion of long-term borrowings	2	(800)		(650)
Current tax payable		(550)		(638)
		(5,832)		(3,485)
Non-current liabilities
Long-term borrowings	2	(2,530)		(2,590)
Deferred tax liabilities		-		(188)
		(2,530)		(2,778)
Total liabilities		(8,362)		(6,263)
Net assets		5,631		5,333

EQUITY
Share capital		209		202
Share premium account		3,092		2,959
Merger reserve		475		475
Retained earnings		1,606		1,532
Equity attributable to equity holders of the parent company		5,382		5,168
Non-controlling interest		249		165
Total equity		5,631		5,333

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

		Share capital	Share premium	Merger reserve	Retained earnings	Total*	Non-controlling interest	Total equity
		£000	£000	£000	£000	£000	£000	£000
Balance at 1 January 2010		202	2,959	475	1,532	5,168	165	5,333
Dividends		-	-	-	(259)	(259)	(83)	(342)
Issue of share capital		7	133	-	-	140	-	140
Transactions with owners		7	133	-	(259)	(119)	(83)	(202)
Profit for the year		-	-	-	333	333	167	500
Total comprehensive income for the year		-	-	-	333	333	167	500
Balance at 31 December 2010		209	3,092	475	1,606	5,382	249	5,631
Balance at 1 January 2009		202	2,956	475	849	4,482	162	4,644
Dividends		-	-	-	(149)	(149)	-	(149)
Issue of share capital		-	3	-	-	3	-	3
Transactions with owners		-	3	-	(149)	(146)	-	(146)
Profit for the year		-	-	-	832	832	3	835
Total comprehensive income for the year		-	-	-	832	832	3	835
Balance at 31 December 2009		202	2,959	475	1,532	5,168	165	5,333

* - Total represents amounts attributable to equity holders of the parent company.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

		2010		2009
		£000		£000
Cash flows from operating activities
Profit after tax		500		835
Adjustments for:
Charge relating to derivative financial instruments		1,752		-
Depreciation		151		107
Amortisation of intangible assets		254		415
Loss on disposal of property, plant and equipment		11		3
Foreign exchange losses/(gains) on foreign currency loans		4		(92)
Interest receivable		(7)		(4)
Interest payable		137		110
Tax expense recognised in income statement		169		325
(Increase)/decrease in inventories		(638)		144
(Increase)/decrease in trade and other receivables		(651)		257
Increase/(decrease) in trade and other payables		826		(95)
Cash generated from operations		2,508		2,005
Interest paid		(136)		(107)
Tax paid		(930)		(401)
Net cash from operating activities		1,442		1,497
Cash flows from investing activities
Paid on acquisition of new subsidiary		(1,316)		(1,914)
Gross cash inherited on acquisition		481		889
Acquisition of subsidiaries, net of cash acquired		(835)		(1,025)
Payment of deferred consideration		(300)		-
Purchase of property, plant and equipment		(207)		(125)
Proceeds from disposal of equipment		12		1
Interest received		7		4
Net cash used in investing activities		(1,323)		(1,145)
Cash flows from financing activities
Proceeds from issue of share capital		140		3
Repayments of borrowings		(415)		(730)
Proceeds from bank loans		1,000		1,443
Repayment of loan notes		(500)		-
Dividends paid - equity share holders		(259)		(149)
Dividends paid - non-controlling interest in subsidiary		(83)		-
Net cash (used in)/from financing activities		(117)		567
Net increase in cash and cash equivalents		2		919
Cash and cash equivalents at beginning of year		2,540		1,621
Cash and cash equivalents at end of year		2,542		2,540

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

1.      Earnings per share

	Year to 31 December 2010	Earnings attributable to equity holders of the parent company	Weighted average number of shares	Earnings per share
		£000	no.	pence
	Profit after tax including exceptional items for calculation of basic and diluted earnings per share	333
	Add-back exceptional items:
	Charge relating to derivative financial instruments, net of tax	1,279
	Amortisation of intangible assets, net of tax	183
	Acquisition-related transactions costs, net of tax	65
	Basic and diluted profit after tax, excluding exceptional items	1,860
	Number of shares for calculation of basic earnings per share including exceptional items		4,131,588
	Dilutive effect of potential shares		134,197
	Number of shares for calculation of diluted earnings per share including exceptional items		4,265,785
	Dilutive effect of potential derivative financial instruments		265,603
	Number of shares for calculation of diluted earnings per share excluding exceptional items		4,531,388
	Basic earnings per share (including exceptional items)			8.1
	Diluted earnings per share (including exceptional items)			7.8
	Basic earnings per share (excluding exceptional items)			45.0
	Diluted earnings per share (excluding exceptional items)			41.0

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

1.       Earnings per share (continued)

	Year to 31 December 2009	Earnings attributable to equity holders of the parent company	Weighted average number of shares	Earnings per share
		£000	no.	pence
	Profit after tax including exceptional items for calculation of basic and diluted earnings per share	832
	Add-back exceptional items:  amortisation of intangible assets, net of tax	299
	Basic and diluted profit after tax, excluding exceptional items	1,131
	Number of shares for calculation of basic earnings per share		4,038,434
	Dilutive effect of potential shares		108,212
	Number of shares for calculation of diluted earnings per share		4,146,646
	Basic earnings per share (including exceptional items)			20.6
	Diluted earnings per share (including exceptional items)			20.1
	Basic earnings per share (excluding exceptional items)			28.0
	Diluted earnings per share (excluding exceptional items)			27.3

2    Maturity of borrowings and net debt

	31 December 2010	Bank loan	Subordinated	Total
			loan notes
		£000	£000	£000
	Repayable in less than 6 months	475	-	475
	Repayable in months 7 to 12	466	-	466
	Current portion of long-term borrowings	941	-	941
	Repayable in years 1 to 5	2,708	-	2,708
	Total borrowings	3,649	-	3,649
	Less:  interest included above			319
	cash and cash equivalents			2,542
	Total net debt			788

	31 December 2009	Bank loan	Subordinated	Total
			loan notes
		£000	£000	£000
	Repayable in less than 6 months	120	505	625
	Repayable in months 7 to 12	170	-	170
	Current portion of long-term borrowings	290	505	795
	Repayable in years 1 to 5	2,927	-	2,927
	Total borrowings	3,217	505	3,722
	Less:  interest included above			482
	cash and cash equivalents			2,540
	Total net debt			700

3.         Acquisition of Sircal Instruments (UK) Limited

On 18 March 2010, the company's subsidiary, Fire Testing Technology Limited ("FTT") acquired the entire issued share capital of Sircal Instruments (UK) Limited ("Sircal"), a company based in the UK.  The total cost of acquisition, all of which was paid in cash, includes the components stated below.

Consideration	£000
Payment to vendors	1,000
Gross cash inherited on acquisition	481
Cash retained in the business	(165)
Payment to vendors in respect of surplus working capital	316
Total consideration transferred	1,316
Acquisition-related transaction costs charged in the Income Statement	77

The amounts recognised for each class of the acquired company's assets liabilities and contingent liabilities recognised at the acquisition date are as follows:

	Pre acquisition carrying amount	Adjustment to fair value	Recognised at acquisition date
	£000	£000	£000
Property, plant and equipment	1	-	1
Intangible assets	-	79	79
Inventories	44	-	44
Trade and other receivables	61	-	61
Cash and cash equivalents	481	-	481
Total assets	587	79	666
Deferred tax liabilities	-	(22)	(22)
Trade payables	(7)	-	(7)
Current tax liability	(114)	-	(114)
Total liabilities	(121)	(22)	(143)
Net identifiable assets and liabilities	466	57	523
Goodwill arising on acquisition			793
Total cost of acquisition			1,316

4.     Post Balance Sheet Event

On 18 March 2011, the company acquired a 51% interest in Deben UK Limited ("Deben"), a company whichdesigns, manufactures and sells devices used to enable or to improve the observation of objects under microscopes.  The acquisition was structured through the creation of a sub-holding company, Bordeaux Acquisition Limited ("BAL" - 51% owned by the company), which acquired the entirety of the share capital of Deben.  The minority shareholders in BAL are the former owners of Deben.

The consideration for the purchase was £3,260,000 and an additional payment will be made to reflect the working capital available at completion in excess of the ongoing requirements of the business.  The purchase by BAL was financed by bank borrowings of £2,422,000 (guaranteed by Judges Scientific plc), an injection of funds into the sub-holding company by the vendors (£497,000) and cash.

Deben's unaudited financial statements for the year ended 31 October 2010 showed net tangible assets of £2,250,000.  Sales amounted to £2,000,000, on which the company generated operating profits of £862,000.  The directors believe that, had the business been owned by the group during that year and excluding one-off items, it would have generated operating profits in the order of £707,000 (before interest, tax, amortisation of intangible assets and expensed transaction costs), of which the group's 51% share would have amounted to £361,000.

5.      Preliminary Announcement

This preliminary announcement, which has been agreed with the auditors, was approved by the board of directors on 29 March 2011.  It is not the group's statutory accounts.  Copies of the group's audited statutory accounts for the year ended 31 December 2010 will be dispatched to shareholders shortly.  Copies will also be available to the public at the company's Registered Office at Unit 19, Charlwoods Road, East Grinstead, West Sussex RH19 2HL and at the company's website, www.judges.uk.com.

The audit reports for the years ended 31 December 2010 and 31 December 2009 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 2009 have been delivered to the Registrar of Companies, but the 31 December 2010 accounts have not yet been filed.

 

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