Final Results and Acquisition
Judges Capital PLC
29 April 2005
JUDGES CAPITAL ANNOUNCES ACQUISITION OF
FIRE TESTING TECHNOLOGY
AND
PRELIMINARY RESULTS TO 31 DECEMBER 2004
The Directors of Judges Capital plc, ('Judges Capital') today reported the
Company's preliminary results for the financial year to 31 December 2004 and, in
a separate statement, also announced:
• The proposed £3.7 million acquisition of Fire Testing Technology ('FTT'),
a private company which specialises in the design, manufacture, installation
and maintenance of fire testing equipment
• A Placing of 956,000 New Ordinary Shares to raise £956,000, the net
proceeds of which will be used to fund, in part, the acquisition of FTT in
conjunction with agreed bank facilities
As disclosed in the Admission Document:
• The Board of Judges Capital has identified 'instrumentation and
testing' as an area that offers 'significant potential for growth and
enhanced shareholder returns.'
• The UK based instrumentation sector is estimated to be worth
approximately £5 billion per annum. This encompasses almost 2,000 active
companies, some 185 of which have an annual turnover in excess of £5
million.
• FTT's turnover for the financial year to 31 May 2004 amounted to £2.84
million, up from £2.28 million, while pre-tax profits advanced from
£289,000 to £635,000. Turnover for the seven months to 31 December 2004
amounted to £1.58 million, while pre-tax profits totalled £227,000
• FTT's current trading is strong and orders in hand or under
negotiation augur well for the onset of the financial year commencing 1
June 2005
• Exports account for more than 90% of FTT's sales. Principal customers
operate in the construction/building, transport, textile, plastics and
electrical industries
• FTT's net assets/shareholders' funds totalled £1.02 million as at 31
December 2004
• Judges Capital's proposed acquisition of FTT is subject to shareholder
approval, completion of the Placing and Admission to AIM.
Fire Testing Technology, founded in 1989, designs, manufactures, installs and
maintains fire testing equipment. This equipment is used to test the effects of
fire on a wide variety of materials thus enabling users to monitor compliance
with legislation, industry standards and customer requirements.
The £3.7 million consideration will be satisfied by a cash payment of £2.3
million at completion, £0.4 million in consideration shares in Judges Capital at
the placing price, £0.5 million in subordinated interest bearing loan notes and
a deferred contingent consideration of up to £0.5 million payable in cash if FTT
generates £773,000 of adjusted operating profit in the year to 31 May 2005.
A notice convening an EGM to be held at 11.00 a.m. on 23 May 2005 will be sent
to shareholders today. Subject to the necessary approvals it is expected that
dealings in the enlarged issued share capital of Judges Capital will commence
on AIM at 8 a.m. on 24 May 2005.
Judges Capital's preliminary results for 2004 show net losses for the year,
before a provision against investments, of £54,000 (2003: £126,000) which, after
provision, amounted to £154,000 (2003: £126,000). Net assets amounted to £1.53
million which, taking into account unrealised profit of £252,000, totalled £1.79
million (2003: £1.78 million) or 84.8p per ordinary share (2003: 84.5p).
Administrative expenses totalled £176,000 (2003: £205,000 including £17,000
relating to an abortive transaction).
Judge Capital's portfolio of active investments at the year-end was as follows:
• a 2.2% shareholding in Interior Services Group ('ISG'), half of which
was held through CFDs (Contracts for Difference). Together with co-investors
Judges Capital controlled 3.1% of ISG at the year end;
• together with David Cicurel (Investments) and Starlight Investments,
an 11.7% shareholding in Poole Investments plc (formerly Pilkington's
Tiles), which owns an attractive real estate site in Poole, Dorset;
• a 3% shareholding in Dickinson Legg, a small engineering company;
• a 1.7% shareholding in Fortress Holdings, a cash shell which has now
entered members' voluntary liquidation. This is the outcome sought and the
Board is confident that this investment will yield a significant profit;
• a 2.4% shareholding in a small marketing company; and
• a residual investment in Lionheart, a cash shell in voluntary
liquidation. During the year Judges Capital received back its original
investment and a significant profit. One more distribution is expected.
In January 2005, Judges Capital disposed of its shareholding in ISG plc, a
transaction that generated total proceeds of £1,156,000 and a profit on sale of
£226,000. Of the proceeds, the sum of £512,000 was used to settle related
liabilities under contracts for difference. In addition, Judges Capital
received £208,000 post the year-end from the liquidators of Fortress Holdings,
an amount that approximates to the original investment.
Commenting on Judges Capital's preliminary results for the financial year to 31
December 2004 and the proposed acquisition of FTT Alex Hambro, Chairman, said:
'The historic focus of our approach has been to acquire strategic stakes in
undervalued quoted companies and propose changes likely to result in enhanced
shareholder value, the principal mechanism being the encouragement of public to
private transactions in order to take advantage of different perceptions of
value between stock market investors and private equity funds.
'Despite our successes, the environment in respect of our business model has
remained hostile. The enthusiasm for small companies has continued with the
FTSE Small Cap index rising approximately 80% in the space of two years from its
low point in March 2003. The continued strength in the share prices of 'Small
Cap' companies has resulted in a serious deterioration of the arbitrage
opportunity between public and private valuations, a factor that is integral to
our strategy. In view of the fact that this public to private arbitrage has
reversed, we need to deploy our skills in order to take advantage of the
opportunities this change is creating.
'Your Board has decided to pursue a new strategy that it believes is more likely
to produce satisfactory shareholder returns in this changed environment. We
announced today the acquisition of Fire Testing Technology, a trading company
involved in the manufacture of fire testing instruments. Fire Testing Technology
is a solid, cash generative, growing, niche business. The instrument sector
consists of a large number of suppliers and we will seek further acquisition
opportunities.'
JUDGES CAPITAL PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2004
During its second year in operation, your Company continued its strategy as an
activist investor in small public companies.
The historic focus of our approach has been to acquire strategic stakes in
undervalued quoted companies and propose changes likely to result in enhanced
shareholder value, the principal mechanism being the encouragement of public to
private transactions in order to take advantage of different perceptions of
value between stock market investors and private equity funds.
During the year under review we continued to build our portfolio and, by the
middle of the year, the Company was close to being fully invested. This
remained the case until the year-end. The net losses for the year, before a
provision against investments, amounted to £54K (2003: £126K) and, after
provision, totalled £154k (2003: £126K). Net assets amounted to £1.53 million
which, together with unrealised profit of £252K, amounted to £1.79 million
(2003: £1.78 million) or 84.8p per ordinary share (2003: 84.5p). We continued
to maintain strict control of our administrative expenses which amounted to
£176K for the period (2003: £205K including £17K relating to an abortive
transaction).
During the year we entered into a number of Contract for Difference (CFDs) in
respect of certain investment holdings. CFDs effectively represent a financing
tool, enabling us to control larger stakes in target companies without having to
purchase shares outright, thus providing greater leverage. The use of CFD
investment enabled us to retain a significant bank balance (£296K) at the
year-end, while still investing an amount equivalent to the funds initially
raised.
Our portfolio of active investments at the year-end was as follows:
• a 2.2% shareholding in Interior Services Group ('ISG'), half of which
was held through CFDs. Together with co-investors we controlled 3.1% of ISG
at the year end;
• together with David Cicurel (Investments) and Starlight Investments,
an 11.7% shareholding in Poole Investments plc (formerly Pilkington's Tiles),
which owns an attractive real estate site in Poole, Dorset;
• a 3% shareholding in Dickinson Legg, a small engineering company;
• a 1.7% shareholding in Fortress Holdings, a cash shell which has now
entered members' voluntary liquidation. This is the outcome we sought and we
are confident that this investment will yield a significant profit;
• a 2.4% shareholding in a small marketing company; and
• a residual investment in Lionheart, a cash shell in voluntary
liquidation; during the year we received back our original investment and a
significant profit. One more distribution is expected.
Despite our successes, the environment in respect of our business model has
remained hostile. The enthusiasm for small companies has continued with the
FTSE Small Cap index rising approximately 80% in the space of two years from its
low point in March 2003. The continued strength in the share prices of 'Small
Cap' companies has resulted in a serious deterioration of the arbitrage
opportunity between public and private valuations, a factor that is integral to
our strategy. In view of the fact that this public to private arbitrage has
reversed, we need to deploy our skills in order to take advantage of the
opportunities this change is creating.
As this buoyancy is proving persistent your Board has decided to pursue a new
strategy that it believes is more likely to produce satisfactory shareholder
returns in this changed environment. We announced today the acquisition of Fire
Testing Technology Limited, a trading company involved in the manufacture of
fire testing instruments. The acquisition amounts to a maximum of £3.7 million
plus a working capital adjustment and will be financed by a £956,000 placing and
by debt. Fire Testing Technology Limited is a solid, cash generative, growing,
niche business. The instrument sector consists of a large number of suppliers
and we will seek further acquisition opportunities. Full details are provided in
the admission document.
With a view to actively pursuing this new strategy we will seek to accelerate
the disposal of our share portfolio. After the year-end we disposed of our
principal holding, ISG, and realised a net profit of £226K and an annual
investment return of 30.5% on our shares (the leverage enabled us to produce a
higher return on the CFDs). We have also made a provision of £100k against the
carrying value of our other investments which reflects our current view of the
net realisable value of the remaining portfolio (excluding ISG). The
aforementioned change in strategy means that we may choose to exit from these
investments more rapidly than would otherwise have been the case. As a result
of this provision, which is calculated on the approximate current market value,
the net loss for the year amounts to £154K.
Your Board recognises that our original business model was thwarted by the
sudden revival in small public company equity valuations and that, due to our
small size, some excellent performances on individual investments have not
translated into overall profitability. We are confident that our new direction
will produce attractive shareholder returns in this new environment and we thank
our shareholders for their continued support.
Current Trading and Future Prospects
In January 2005, Judges Capital disposed of its shareholding in ISG plc, a
transaction that generated total proceeds of £1,156,000 and a profit on sale of
£226,000. Of the proceeds, the sum of £512,000 was used to settle related
liabilities under contracts for difference. In addition, Judges received
£208,000 post the year-end from the liquidators of Fortress Holdings, an amount
that approximates to Judges' original investment.
Alex Hambro
Chairman
Date: 29 April 2005
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2004
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2004
Year ended Period ended
31 December 31 December
2004 2003
£ £
Administrative expenses (175,535) (204,859)
------------ -------------
Operating loss (175,535) (204,859)
Profit on disposal of investments 57,654 30,049
Provision against investments (100,000) -
Investment income 61,912 14,750
Net interest receivable and similar
income 2,441 34,188
------------ ------------
Loss on ordinary activities before
taxation (153,528) (125,872)
Tax on loss on ordinary activities - -
----------- ------------
Loss on ordinary activities after
taxation (153,528) (125,872)
=========== ============
Loss per ordinary share (7.3p) (6.7p)
=========== ============
All operations are continuing operations.
There are no recognised gains and losses other than those passing through the
profit and loss account.
BALANCE SHEET
AS AT 31 DECEMBER 2004
2004 2003
£ £
Current assets
Debtors 8,230 18,912
Investments 1,702,075 1,007,336
Cash at bank and in hand 296,073 703,647
----------- -----------
2,006,378 1,729,895
Creditors: amounts falling due
within (472,466) (42,455)
one year ----------- -----------
Total assets less current 1,533,912 1,687,440
liabilities =========== ===========
Capital and reserves
Called up share capital 117,818 117,818
Share premium account 1,695,494 1,695,494
Profit and loss account (279,400) (125,872)
----------- -----------
Shareholders' funds 1,533,912 1,687,440
=========== ===========
Equity interests 1,521,412 1,674,940
Non-equity 12,500 12,500
interests ----------- -----------
1,533,912 1,687,440
=========== ===========
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2004
Year ended Period ended
31 December 2004 31 December 2003
£ £ £ £
Net cash outflow from operating
activities (195,365) (166,566)
Returns on investments and
servicing of finance
Interest received 25,279 34,188
Interest paid (360) -
Dividends received 58,462 -
--------- ---------
83,381 34,188
--------- ---------
Net cash outflow before
management of (111,984) (132,378)
liquid resources and financing
Management of liquid resources
Purchase of investments (650,790) (1,039,372)
Sale of investments 412,500 62,085
--------- ---------
Net cash outflow from management
of liquid resources (238,290) (977,287)
--------- ---------
Net cash outflow before financing (350,274) (1,109,665)
--------- ---------
Financing
Issue of Ordinary shares - 2,001,002
Issue of convertible Redeemable - 12,500
shares
Expenses paid in connection with
share - (200,190)
issue
Payments for CFDs (57,300) -
--------- ---------
Net cash (outflow)/inflow from (57,300) 1,813,312
financing --------- ---------
(Decrease)/increase in cash in
the (407,574) 703,647
period ========= =========
1 Loss per ordinary share
Loss per share is calculated by dividing the loss for the period of
£153,528 (2003:£125,872) by the weighted average number of shares in issue
during the period of 2,106,356 (2003: 1,888,649). As there is a loss for
the period there is no dilutive effect arising from the convertible
redeemable shares.
2 Current asset investments
Historical Period end value
Cost Market Directors' Total
valuation valuation Valuation
£ £ £ £
Unquoted
investments 227,399 - 260,000 260,000
Quoted investments 1,574,676 1,693,601 - 1,693,601
Less: provision
against
investments (100,000) - - -
--------- --------- --------- --------
At 31 December
2004 1,702,075 1,693,601 260,000 1,953,601
========= ========= ========= ========
Net unrealised
gain at 31
December 2004 - 218,925 32,601 251,526
========= ========= ========= ========
Historical Period end value
Cost Market Directors' Total
valuation valuation Valuation
£ £ £ £
Unquoted
investments 368,467 - 420,750 420,750
Quoted investments 638,869 679,756 - 679,756
--------- --------- --------- --------
At 31 December
2003 1,007,336 679,756 420,750 1,100,506
========= ========= ========= ========
Net unrealised
gain at 31
December 2003 - 40,887 52,283 93,170
========= ========= ========= ========
3 Statement of movements on reserves Share premium Profit and
account loss
account
£ £
Balance at 31 December 2003 1,695,494 (125,872)
Retained loss for the year - (153,528)
---------- ----------
Balance at 31 December 2004 1,695,494 (279,400)
========== ==========
4 Reconciliation of movements in 2004 2003
shareholders' funds
£ £
Loss for the financial period (153,528) (125,872)
Proceeds from issue of shares - 1,813,312
---------- ----------
Net addition to shareholders' funds (153,528) 1,687,440
Opening shareholders' funds 1,687,440 -
---------- ----------
Closing shareholders' funds 1,533,912 1,687,440
========== ==========
The results for the period ended 31 December 2004 will be posted to shareholders
and the AIM team today. Further copies are available at the Company's registered
office, 1 Bickenhall Mansions, Bickenhall Street, London W1U 6BP.
Ends
For further information please contact:
David Cicurel, Chief Executive, Judges Capital PLC : Tel: 0207 437 4037
Mike Sawbridge, Shore Capital & Corporate Limited: Tel: 0151 600 3722
Melvyn Marckus, Cardew Group: Tel: 0207 930 0777
END
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