Final Results

RNS Number : 3056A

Judges Scientific PLC

29 March 2012

 



29 March 2012

Judges Scientific plc

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

PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

Highlights:

·    Record basic earnings per share, excluding exceptional items, of 61p (2010: 45p); including exceptional items: 45.2p (2010: 8.1p)

·    Proposed final dividend of 6.7p (2010: 5p), making a total distribution for the year of 10p (2010: 7.5p)

·    44% increase in pre-tax profit to a record £3.95 million (2010: £2.75 million) before exceptional items, tax and non-controlling interests

·    Record revenues of £21 million compared with £16 million in 2010 (up 15% like-for-like)

·    Cash in hand of £4 million as at 31 December 2011; net debt of £0.7 million (2010: £0.8 million) despite the cash acquisition of Deben

·    Global Digital Systems acquired on 6 March 2012

·    KED acquired by Deben on 6 March 2012

Alex Hambro, Chairman of Judges Scientific, commented:

"Solid organic growth and a strong maiden contribution from Deben have enabled the Group to achieve another set of record results. Deben was purchased out of cash-flow, leaving net debt effectively unaltered at the year-end. We have started the new financial year with two acquisitions, including Global Digital Systems which earned as much profit last year by itself as the entirety of Judges' operations in 2008."

Chairman's Statement

It is a privilege to be able to report record results for the sixth consecutive year.

The year ended 31 December 2011 saw Group revenues advance 30% from £16 million to £20.8 million. This reflects organic growth of 15% and includes a full year's contribution from Sircal and a maiden contribution from Deben.

Profit before tax, exceptional items and minorities, rose by 44% from £2.75 million in 2010 to a record £3.95 million, with the operating contribution of the businesses owned on 1 January 2010 growing by 10%. Basic earnings per share, before exceptional items, rose from 45p to 61p.

Exceptional items include the amortisation of intangible assets, acquisition expenses and a net accounting gain following a recovery under an insurance claim. They also reflect the difference in valuation, from one year-end to the next, of the Convertible Redeemable shares; after recording significant increases in 2010 and during the first half of 2011, the Company's share price declined in the summer, in line with the market, and finished the year with little progress, producing an accounting "loss" of £304,000. Your Board regards this as unrelated to the Group's operating performance and it is therefore treated as an exceptional item. Profit, including exceptional items but before tax and minorities, amounted to £2.89 million (2010: £0.67 million). This equates to basic earnings per share, including exceptional items, of 45.2p (2010: 8.1p). Fully diluted earnings per share, after exceptional items, amounted to 42.9p (2010: 7.8p).

Corporate activity

On 18 March 2011, the Group acquired a 51% interest in Deben UK Limited, a company which makes instruments used in electron microscopy. The vendors retained a 49% non-controlling interest in the acquisition vehicle. The purchase price in respect of 100% of Deben was £3.26 million. To finance the purchase, Lloyds Bank provided Bordeaux, 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.

Post balance sheet, on 6 March 2012, Deben completed the purchase of the business of KE Developments Limited ("KED"). KED makes and sells accessories for electron microscopes to the same client base as Deben. The business was broadly breaking even and is not expected to contribute to Group profits until it is integrated into Deben during the course of 2012. Deben purchased KED's fixed assets for £40,000 and will pay deferred goodwill up to a maximum of £300,000 over five years, dependent upon the sales of KED products.

On 6 March 2012, Judges acquired the entire share capital of Global Digital Systems Limited ("GDS"). GDS designs, manufactures and sells instruments used to test the physical properties of soil and rocks; the client base is worldwide and consists of universities and commercial users servicing the civil engineering sector. The company achieved a 23% compound annual growth rate over the last five years and exports 83% of its production; it won a Queen's Award for Enterprise - International Trade in 2011. GDS generated adjusted EBIT of £1.27 million in 2011 and the £7.65 million purchase price was financed by an extension of the facilities provided by Lloyds Bank.

Trading

2011 represented another year of satisfactory trading for the Group. Order intake, sales and margins were healthy and cash generation was strong. The turbulence experienced within the global economy had no material impact on Judges' niche markets and sales held up well, even in continental Europe which accounts for a third of Group turnover. The more dynamic economies of the US and Asia yielded more progress. The task of updating a significant proportion of the Group's product offering continued.

The results of our operations during 2011 have enabled the Group modestly to increase its key Return On Total Invested Capital performance indicator from 44.8% to 46.2%.  Inevitably, the acquisition of GDS will bring about a short-term reduction in this measure.

Financial position

Net debt as at 31 December 2011 stood at £1,227,000, or £730,000 excluding subordinated amounts owed to the minority shareholders of Bordeaux, compared with £788,000 as at the previous year-end. The Group's cash-flow proved sufficient to finance the purchase of Deben and the land in Laughton, East Sussex, upon which we are planning to build a new factory. As is customary, a significant proportion of our debt is denominated in foreign currency in order to hedge against the impact of exchange rate fluctuations on our export activities. Year-end cash balances progressed from £2.5 million to £4 million.

It gives the Board considerable pleasure to disclose that on 29 February 2012, the Group was in a net cash position (excluding subordinated debt to minority shareholders); this indicates that all the sums borrowed to purchase our operations since the Company's readmission in May 2005 had been repaid or were capable of being repaid out of positive cash balances. As a result of the acquisition of GDS the Group is again in a net debt position; to fund the acquisition, the Company's indebtedness was replaced by a £5 million term loan and a £4 million overdraft facility.  The Bordeaux financing remained unchanged.

The Group has obtained planning permission for the factory development in Laughton and construction is expected to commence in the near future. Lloyds Bank has agreed in principle to lend up to £2 million secured on the Group's wholly-owned properties.

Dividends

Your Board is pleased to recommend a final dividend of 6.7p per share (2010: 5p per share) which, subject to approval at the forthcoming Annual General Meeting on 30 May 2012, will make a total distribution of 10p per share for 2011 (2010: 7.5p per share). Despite the proposed increase, the dividend total is still covered six times by adjusted earnings per share, unchanged from 2010.

The proposed final dividend will be payable on 6 July 2012 to shareholders on the register on 8 June 2012 and the shares will go ex-dividend on 6 June 2012.

Convertible Redeemable shares

The accounting treatment of the Convertible Redeemable shares has resulted in significant non-cash fluctuations in the Company's reported profits, to the discomfort of the investment community. The Board has attempted to minimise the impact by treating the resulting losses as exceptional items but the situation remains unsatisfactory. The Board therefore proposes to open a window of opportunity until December 2012 during which the holders could redeem for cash part or all of their Convertible Redeemable shares at a 15% discount to their theoretical conversion value. This would encourage holders to deal with these shares in advance of their final maturity in December 2014. Furthermore, the proposed mechanism would lessen the likelihood of market disturbance as, without this redemption option, holders might need to finance the conversion price through share sales. A resolution designed to amend the Company's Articles in order to give effect to this scheme will be proposed at the forthcoming AGM.

Share Incentive Plan

The Company is launching a Share Incentive Plan ("SIP") to enable all employees with a minimum 12 months' service to purchase shares in a tax efficient manner up to a value of £1,500 per annum, starting in April 2012. In the first tax year, the Company will match pound-for-pound individual employees' investments of up to £600. This will enable all those who work hard to support the Group's progress to have a share in the value they help to create. The Board hopes that many of the Group's employees will choose to participate in the scheme.

Current trading and prospects

The economic environment has shown little change during the past year and uncertainties persist, both in relation to efforts to reduce government spending in the developed world and with regard to the relative strength of Sterling. The Group has started 2012 with good order book visibility and a low level of debt; the acquisitions completed in March give your Directors confidence that 2012 will herald further progress in its trading position.

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 2011

				2011				2010
	Note	Before exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total
		£000	£000	£000		£000	£000	£000
Revenue		20,810	-	20,810		16,005	-	16,005
Operating costs excluding exceptional items		(16,677)	-	(16,677)		(13,123)	-	(13,123)
Operating profit excluding exceptional items		4,133	-	4,133		2,882	-	2,882
Exceptional items
Amortisation of intangible assets		-	(1,155)	(1,155)		-	(254)	(254)
Net insurance recovery		-	596	596		-	-	-
Charge relating to derivative financial instruments		-	(304)	(304)		-	(1,752)	(1,752)
Acquisition costs		-	(196)	(196)		-	(77)	(77)
Operating profit/(loss)		4,133	(1,059)	3,074		2,882	(2,083)	799
Interest receivable		7	-	7		7	-	7
Interest payable		(195)	-	(195)		(137)	-	(137)
Profit/(loss) before tax		3,945	(1,059)	2,886		2,752	(2,083)	669
Taxation		(1,017)	210	(807)		(725)	556	(169)
Profit/(loss) and total comprehensive income for the year		2,928	(849)	2,079		2,027	(1,527)	500
Attributable to:
Equity holders of the parent company		2,588	(668)	1,920		1,860	(1,527)	333
Non-controlling interest		340	(181)	159		167	-	167
Earnings per share - total and continuing
Basic	1	61.0p	-	45.2p		45.0p	-	8.1p
Diluted	1	52.7p	-	42.9p		41.0p	-	7.8p

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2011

		2011		2010
	Note	£000		£000
ASSETS
Non-current assets
Property, plant and equipment		1,940		956
Goodwill		5,316		5,290
Other intangible assets		2,133		419
Deferred tax asset		-		348
		9,389		7,013
Current assets
Inventories		2,052		1,923
Trade and other receivables		3,674		2,515
Cash and cash equivalents		3,954		2,542
		9,680		6,980
Total assets		19,069		13,993
LIABILITIES
Current liabilities
Trade and other payables		(3,465)		(2,730)
Derivative financial instruments		(1,739)		(1,752)
Current portion of long-term borrowings	2	(1,762)		(800)
Current tax payable		(851)		(550)
		(7,817)		(5,832)
Non-current liabilities
Long-term borrowings	2	(3,419)		(2,530)
Deferred tax liabilities		(122)		-
		(3,541)		(2,530)
Total liabilities		(11,358)		(8,362)
Net assets		7,711		5,631

EQUITY
Share capital		214		209
Share premium account		3,195		3,092
Capital redemption reserve		3		-
Merger reserve		475		475
Retained earnings		3,489		1,606
Equity attributable to equity holders of the parent company		7,376		5,382
Non-controlling interest		335		249
Total equity		7,711		5,631

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

		Share capital	Share premium	Capital redemption reserve	Merger reserve	Retained earnings	Total*	Non-controlling interest	Total equity
		£000	£000	£000	£000	£000	£000	£000	£000
Balance at 1 January 2011		209	3,092	-	475	1,606	5,382	249	5,631
Dividends		-	-	-	-	(351)	(351)	(73)	(424)
Issue of share capital		5	103	-	-	-	108	-	108
Arising on conversion of convertible redeemable shares		-	-	3	-	314	317	-	317
Transactions with owners		5	103	3	-	(37)	74	(73)	1
Profit for the year		-	-	-	-	1,920	1,920	159	2,079
Total comprehensive income for the year		-	-	-	-	1,920	1,920	159	2,079
Balance at 31 December 2011		214	3,195	3	475	3,489	7,376	335	7,711
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

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

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

		2011		2010
		£000		£000
Cash flows from operating activities
Profit after tax		2,079		500
Adjustments for:
Charge relating to derivative financial instruments		304		1,752
Depreciation		170		151
Amortisation of intangible assets		1,155		254
Loss on disposal of property, plant and equipment		-		11
Foreign exchange losses on foreign currency loans		3		4
Interest receivable		(7)		(7)
Interest payable		195		137
Tax expense recognised in income statement		807		169
Decrease/(increase) in inventories		220		(638)
Increase in trade and other receivables		(577)		(651)
Increase in trade and other payables		401		826
Cash generated from operations		4,750		2,508
Interest paid		(190)		(136)
Tax paid		(1,136)		(930)
Net cash from operating activities		3,424		1,442
Cash flows from investing activities
Paid on acquisition of new subsidiary		(4,622)		(1,316)
Gross cash inherited on acquisition		1,655		481
Acquisition of subsidiaries, net of cash acquired		(2,967)		(835)
Payment of deferred consideration		-		(300)
Purchase of property, plant and equipment		(579)		(207)
Proceeds from disposal of equipment		-		12
Interest received		7		7
Net cash used in investing activities		(3,539)		(1,323)
Cash flows from financing activities
Proceeds from issue of share capital		108		140
Repaid on conversion of Convertible Redeemable Shares		(1)		-
Repayments of borrowings		(1,075)		(415)
Proceeds from bank loans		2,422		1,000
Issue/(repayment) of loan notes		497		(500)
Dividends paid - equity share holders		(351)		(259)
Dividends paid - non-controlling interest in subsidiary		(73)		(83)
Net cash from/(used in) financing activities		1,527		(117)
Net increase in cash and cash equivalents		1,412		2
Cash and cash equivalents at beginning of year		2,542		2,540
Cash and cash equivalents at end of year		3,954		2,542

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

1.      Earnings per share

	Year to 31 December 2011	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	1,920
	Add-back exceptional items net of tax and non-controlling interest, as applicable:
	Charge relating to derivative financial instruments	351
	Net insurance recovery	(224)
	Amortisation of intangible assets	481
	Acquisition-related transactions costs	95
	Utilisation of prior year tax losses	(35)
	Basic and diluted profit after tax, excluding exceptional items	2,588
	Number of shares for calculation of basic earnings per share including exceptional items		4,243,571
	Dilutive effect of potential shares		231,433
	Number of shares for calculation of diluted earnings per share including exceptional items		4,475,004
	Dilutive effect of potential derivative financial instruments		432,959
	Number of shares for calculation of diluted earnings per share excluding exceptional items		4,907,963
	Basic earnings per share (including exceptional items)			45.2
	Diluted earnings per share (including exceptional items)			42.9
	Basic earnings per share (excluding exceptional items)			61.0
	Diluted earnings per share (excluding exceptional items)			52.7

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

1.       Earnings per share (continued)

	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 net of tax and non-controlling interest, as applicable:
	Charge relating to derivative financial instruments	1,279
	Amortisation of intangible assets	183
	Acquisition-related transactions costs	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 2011

2        Maturity of borrowings and net debt

	31 December 2011	Bank loan	Subordinated	Total
			loans
		£000	£000	£000
	Repayable in less than 6 months	686	497	1,183
	Repayable in months 7 to 12	772	-	772
	Current portion of long-term borrowings	1,458	497	1,955
	Repayable in years 1 to 5	3,611	-	3,611
	Later than 5 years	109	-	109
	Total borrowings	5,178	497	5,675
	Less:  interest included above	494	-	494
	cash and cash equivalents	3,954	-	3,954
	Total net debt	730	497	1,227

	31 December 2010	Bank loan	Subordinated	Total
			loans
		£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	-	319
	cash and cash equivalents	2,542	-	2,542
	Total net debt	788	-	788

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

3        Acquisition of Deben UK Limited

On 18 March 2011, the company's 51% subsidiary, Bordeaux Acquisition Limited ("Bordeaux") acquired the entire issued share capital of Deben UK Limited ("Deben"), a company based in the UK.  The total cost of acquisition, all of which was paid in cash, includes the components stated below.  There was no net asset value to the Bordeaux Group (Bordeaux Acquisition Limited and Deben UK Limited combined) at the point of acquisition as the debt taken on to finance the consideration of Deben UK Limited is held in Bordeaux Acquisition Limited.  On this basis there was no value arising at the date of acquisition in respect of the 49% non-controlling interest in Bordeaux Acquisition Limited.  Value for the non-controlling interest arises only from post-acquisition profits of the Bordeaux Group.

	£000
Payment to vendors	3,260
Gross cash inherited on acquisition	1,655
Cash retained in the business	(293)
Payment to vendors in respect of surplus working capital (paid in August 2011)	1,362
Total consideration transferred	4,622
Acquisition-related transaction costs charged in the Income Statement	196

The amounts recognised for each class of the acquiree's assets, liabilities and contingent liabilities 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	585	-	585
Intangible assets	-	2,869	2,869
Inventories	349	-	349
Trade and other receivables	574	-	574
Cash and cash equivalents	1,655	-	1,655
Total assets	3,163	2,869	6,032
Deferred tax liabilities	(12)	(774)	(786)
Trade payables	(336)	-	(336)
Current tax liability	(314)	-	(314)
Total liabilities	(662)	(774)	(1,436)
Net identifiable assets and liabilities	2,501	2,095	4,596
Goodwill arising on acquisition			26
Total cost of acquisition			4,622

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

4.       Post Balance Sheet Events

On 6 March 2012, the company acquired the entire issued share capital of Global Digital Systems Limited ("GDS").  GDS designs, manufactures and sells instruments used to test the physical properties of soil and rocks.  The company's investment in GDS amounted to approximately £8.1 million, including estimated transaction costs of £450,000.  An additional payment will be made to reflect the working capital available at completion in excess of the ongoing requirements of the business, which the directors expect to be covered by the cash inherited on completion.  The acquisition was financed by existing cash resources, a £2.5 million increase in bank loans and an increase from £0.5 million to £4 million in overdraft facilities.

GDS's unaudited financial statements for the year ended 31 October 2011 showed net tangible assets of £1,718,000.  Sales amounted to £4,900,000, on which the company generated operating profits of £877,000.  The directors believe that, had the business been owned by the group during that year and excluding one-off items, GDS would have generated operating profits in the order of £1,275,000 (before interest, tax, amortisation of intangible assets and expensed transaction costs).

Accounts to the date of completion will be drawn up promptly.  However at the time of finalising these financial statements the information required under IFRS 3R concerning the net identifiable assets and liabilities acquired was not yet available.

Also on 6 March 2012 Deben completed the acquisition of the trade and certain assets of KE Developments Limited ("KE").  Fixed asset purchases amounted to £40,000 and the company will purchase inventories from the vendor as required over a period of 5 years (having paid a deposit of £50,000 on completion).  In addition, deferred consideration up to a maximum of £300,000 will be payable monthly at reducing rates over a 5 year period, based on sales of KE products.

5.      Preliminary Announcement

This preliminary announcement, which has been agreed with the auditors, was approved by the board of directors on 28 March 2012.  It is not the group's statutory accounts.  Copies of the group's audited statutory accounts for the year ended 31 December 2011 will be available at the company's website, www.judges.uk.com, promptly after the release of this preliminary announcement and a printed version 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.

The audit reports for the years ended 31 December 2011 and 31 December 2010 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 2010 have been delivered to the Registrar of Companies, but the 31 December 2011 accounts have not yet been filed.

 

END

 

 

FR SELFMAFESEID