Final Results

Judges Scientific PLC

21 March 2024

 

21 March 2024

Judges Scientific plc

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

FINAL RESULTS

Record performance and 95p full year dividend

Judges Scientific (AIM:JDG), a group focused on acquiring and developing companies in the scientific instrument sector, announces its final results for the year ended 31 December 2023.

Key financials

Year ended 31 December	2023	2022		Change
Revenue	£136.1m	£113.2m		20%
Adjusted* operating profit	£34.8m	£30.1m		16%
Tax on Adjusted earnings	£6.9m	£4.9m		41%
Adjusted* basic earnings per share	374.6p	363.8p		3%
Cash generated from operations	£31.3m	£24.0m		30%
Final dividend per share	68.0p	59.0p
Statutory operating profit	£21.6m	£18.2m
Statutory basic earnings per share	145.8p	196.1p
As at:	31 Dec 2023	31 Dec 2022
Adjusted* net debt (excl. IFRS 16)	£(45.1)m	£(52.0)m
Cash balances	£13.7m	£20.8m
Statutory net debt	£(51.6)m	£(39.1)m

Other financial highlights

·      Organic** revenue increased 15% compared with 2022.

·      Organic** order intake up 7% compared with 2022.

·      Organic** order book at 17.0 weeks (2022: 21.1 weeks); total order book at 16.2 weeks.

·      Proposed final dividend of 68p, totalling 95p for the year, an increase of 17%; covered 3.9 times by Adjusted earnings.

Strategic Highlights

·      Two small acquisitions, Henniker Scientific and Bossa Nova Vision, for a total consideration of £3.6m (including earn-out but excluding excess cash).

·      Strengthened Executive team following the appointment of Dr Tim Prestidge as Group Business Development Director in February 2023.

·      Appointment of Sue Nyman to the Board as independent non-executive director.

Outlook

·      Commencing 2024 with a solid Organic order book.

·      Timing of next Geotek Coring expedition and its revenue recognition in 2024 remains uncertain.

·      Supply chain now returned to normal.

·      YTD Organic orders marginally behind 2023 comparative period, which included exceptionally large post-lockdown contribution from China.

·      The Board remains comfortable with current market expectations.

* Adjusted earnings figures exclude adjusting items relating to amortisation of acquired intangible assets, acquisition-related costs, share based payments and hedging of risks materialising after the end of the year. Adjusted net debt includes acquisition-related liabilities and excludes IFRS 16 liabilities.

** Organic describes the performance of the Group including businesses acquired prior to 1 January 2022.

Alex Hambro, Chairman of Judges Scientific, commented:  

"The Group has again beaten its previous records in Organic order intake, revenue, Adjusted operating profit, cash generation and Adjusted earnings per share in an improving but still challenging environment. We are delighted that the proposed dividend for the full year has now equalled the Group's original IPO price.

Another year of records in our performance metrics illustrates the quality and dedication of all our colleagues at every level. I trust our shareholders will join the Board in thanking them for delivering these results.

In addition, a special note of thanks to Ralph Cohen for his immense 18-year contribution to the company in both an executive and non-executive capacity."

Investor Presentation

Judges Scientific is hosting a webinar, available to all existing and potential shareholders, covering the results for the year ended 31 December 2023, on 21 March 16:45 UK time. Investors can register for the webinar here: https://bit.ly/JDG_FY23_results_webinar 

For further information please contact:

Judges Scientific plc David Cicurel, CEO Brad Ormsby, CFO Tel: [phone]	Shore Capital (Nominated Adviser & Joint Broker) Stephane Auton Iain Sexton Tel: [phone]
Liberum (Joint Broker) Edward Mansfield Nikhil Varghese Tel : [phone]	Investec Bank plc (Joint Broker) Virginia Bull Carlton Nelson Tel: [phone]
Alma Strategic (Financial Public Relations) Sam Modlin Rebecca Sanders-Hewett Joe Pederzolli Tel: [phone] [e-mail]

Notes to editors:

Judges Scientific plc (AIM: JDG), is a group focused on acquiring and developing companies in the scientific instrument sector. The Group consists of 23 businesses acquired since 2005.

The acquired companies are primarily UK-based with products sold worldwide to a diverse range of markets including: higher education institutions, scientific research facilities, manufacturers and regulatory authorities. The UK is a recognised centre of excellence for scientific instruments.  The Group has received five Queen's Awards for innovation and export.

The Group's companies predominantly operate in global niche markets, with long term growth fundamentals and resilient margins.

Judges Scientific maintains a policy of selectively acquiring businesses that generate sustainable profits and cash. Shareholder returns are created through the reduction of debt, organic growth and dividends.

For further information, please visit www.judges.uk.com

Chairman's Statement

The year started in a positive fashion, following the final re-opening of China after successive Covid lockdowns. An exceptionally good order intake in December 2022 laid the foundations for a strong 2023 and the alleviation of supply chain issues during the year enabled the Group to achieve new records in Organic order intake, Organic revenue and Organic Adjusted profits. Pre-tax profits (including a full year of Geotek and the contribution of two small acquisitions completed in the spring) and cash generation also reached record levels as well as Adjusted earnings per share, although as previously highlighted to shareholders, the increased UK corporate tax rate tempered post-tax growth.

Generating attractive returns for our shareholders remains the core purpose of the Group. As such, the Board is pleased to be recommending a final dividend of 68p, for a total dividend of 95p in respect of 2023, which was a 17% increase on the prior year (2022: 81p), whilst retaining ample cover of 3.9 times to enable sustained progression in line with the Group's dividend policy. Since the payment of the first dividend in respect of 2006, regular dividends have grown at a compound annual rate of 23% and total dividend distributions have aggregated to 7.5x the 2005 re-admission price of 100p. Your Board is delighted to be recommending the payment of a total dividend for the year equal to the placing price paid by all shareholders when the shares were first admitted in 2003, demonstrating Judges' well-established track record of delivering both growth and shareholder value.

Strategy

The Group's strategy remains unchanged and is based on creating attractive returns through highly selective and carefully structured acquisitions, underpinned by the diversified, solid and growing earnings and cashflows arising from our existing businesses.

The Group's acquisition model is to acquire small/medium-sized scientific instrument manufacturers, paying a disciplined multiple of earnings and to finance any acquisition, ideally, through existing cash resources and/or bank borrowings. We remain highly selective in seeking to acquire businesses with a history of sustainable profits and cashflows, to obtain immediate and enduring earnings enhancement for our shareholders. It is paramount that acquisitions are completed only when the Directors are satisfied that the target business has sound underlying strength with robust and defensible margins and is acquired at a sensible multiple.

Post-acquisition, the Group provides a favourable environment for these businesses to continue to prosper. Much executive effort is invested into helping their autonomous management teams improve their quality in terms of talent, leadership, innovation, geographic reach, production speed/quality and financial control.  Organic revenue growth and operational improvements are an ever-growing component of shareholder returns.

As a result of the dependable growth of your Group, it has been possible to promptly reduce debt, thereby generating the financial resources necessary to reinvest in further acquisitions and reward shareholders with a progressively increasing dividend, subject always to our prudent approach to gearing and earnings cover.

The underlying global market for scientific instrumentation remains robust and the sector's long-term growth drivers provide comfort that the Group will continue to deliver durable returns for our shareholders despite the potential for some short-term variability in performance. These long-term market drivers are rooted in the global expansion of higher education; the need for measurement tools to support the relentless worldwide search for optimisation and the desire for discovery across industry and science. 

The nature of Judges' business model, combined with management's consistent execution of its strategy, has generated excellent returns for investors. Sustained growth has been delivered through our business model clearly seen through the long-term compound annual growth rate ("CAGR") for revenue and profit, both for the Group as whole and also on an Organic basis. Over the past 17 years, the Group has provided shareholders with a total revenue CAGR of 21% and related EBIT growth of 28% and the Organic measure is 8% and 11% respectively. Our disciplined approach to acquisitions allied with the aforementioned performance, has resulted in maintaining Return on Total Invested Capital ("ROTIC") of comfortably over 20% and with the Group's strong ability to convert profit into cash, has enabled us to stick to our policy of increasing the dividend by a minimum of 10% per year with compound annual growth of 23% also over the past 17 years.

Our team

Another year of records in our performance metrics illustrates the quality and dedication of all our colleagues at every level. I trust our shareholders will join the Board in thanking them for delivering these results.

Early in the year, our Board was delighted to strengthen our Executive team with the appointment of Dr Tim Prestidge, as Group Business Development Director. Tim has significant and relevant experience having spent his career to date in senior roles at both Renishaw plc and Halma plc. He is already making a substantial contribution to the future growth of our Group.

In November, the Board welcomed Sue Nyman as a non-executive director; she brings extensive public company and governance experience to the Board and we look forward to working with her as the Group continues to execute its growth strategy.

Ralph Cohen retired at the end of the year after 18 years with Judges, initially as finance director and latterly as a non-executive director. His contribution to the Group and its culture has been invaluable and he has overseen a period of substantial corporate growth and increase in shareholder value and the Board, on behalf of the shareholders, thanks him for his service to the Group. 

Alex Hambro

Chairman

20 March 2024

Chief Executive's Report

2023 started on a positive note as the impact of Covid was finally abating and China had put an end to a succession of strict lockdowns. This resulted in a strong influx of orders in December 2022 particularly from China, which gave us a larger than usual opening order book, which alongside the progressive alleviation of supply chain difficulties, ensured healthy revenue growth. The Group's solid market positioning and continued favourable exchange rates enabled it to mitigate inflationary pressures, and operating margins were maintained. This translated into new record Organic revenues, Adjusted pre-tax profits, cash generation and Adjusted earnings per share. A full year of Geotek and two small acquisitions in the spring contributed to the Group's performance. As previously noted, this and the Organic achievements were largely absorbed by higher tax rates, increased borrowing costs and some dilution from the issue of new shares in respect of half of the Geotek earn-out.

We were pleased to have navigated the inflationary environment and to have maintained margins at our Organic businesses. The supply chain difficulties, previously encountered by the Group, mostly abated during the year which enabled our businesses to increase capacity, thereby reducing lead-times for our customers, and returning the order book back to more usual levels. Overall, more than half of our Organic businesses were therefore able to deliver record profits in 2023. We continue to focus on operational and business information improvements and also piloted a new approach to R&D projects which we hope to roll out across the Group. We also welcomed several new leaders this year with our continued focus on having the highest quality management teams, who are relentless in delivering incremental growth and new and improved products with which to support the requirements of our ever increasing customer base.  

Order intake

Order intake is the main driver of our business. Organic intake was up 7% year-on-year. This shows a compound growth of 4% since the pre-Covid 2019 record. Although Organic intake made solid progress, this was not uniform and a few of our smaller Organic businesses still found it challenging to restore order intake to 2019 levels.

The strongest region was the UK (30% up on 2022 but this included one large single order), followed by China/Hong Kong (up 27%). The rest of Europe and North America were both 4% up and the Rest of the World was down 11%. The best absolute performances by country were achieved in the UK, China/Hong Kong and the USA and the worst in Australia and South Africa.

Total Group intake was affected by the fact that the Geotek coring expedition conducted in 2023, had already been booked in 2022.

Revenues

Group revenues for the financial year ended 31 December 2023 progressed from £113 million to £136 million, including Organic growth of 15%, the full-year contribution from Geotek and the part-year contribution of the acquisitions completed during 2023.

Supply chain issues that previously impacted the Group alleviated during 2023, enabling the Group to convert some of a large order book into sales revenue and hence Organic revenue grew 15% to reach £113m, a new record. Most Group companies have successfully and progressively reduced their large order book. As Organic revenue exceeded Organic intake by £3m, this produced a small absolute reduction in the Organic order book. When measured in weeks (in accordance with budgeted Organic revenue of the following year) it receded from 21.1 weeks at 31 December 2022 to 17.0 weeks at the end of 2023. The total order book at 31 December 2023 stood at 16.2 weeks.

The Group continues to be a strong exporter and is well diversified, both via its end markets and across the globe, with 28% of the Group's revenues earned in North America, 25% in the Rest of Europe and 14% in China/Hong Kong. Organic revenues grew in all regions: China/Hong Kong progressed 33% and the Rest of the World 31%; North America advanced 16%. The UK grew 4% and the Rest of Europe 2%. The highest absolute increases were China/Hong Kong, the US, Taiwan, South Africa and Japan; the most notable decreases were Germany and the Czech Republic.

Profits

The most important driver of Judges' operating margins is volume. The 15% growth in Organic revenue maintained our Organic EBITA margin before central costs at 25% (2022: 25%). Inflationary pressures and the resumption of travel and exhibition costs were well absorbed thanks to our strong market positions and favourable exchange rates. The growth in Organic revenue produced growth of 17% in Adjusted Organic EBIT contribution; this was supplemented by the two small acquisitions made in 2023, and by a full year of Geotek which generated EBIT that was 9% lower than its earn-out EBIT threshold.

Adjusted profit before tax progressed to a record £31.7m (2022: £28.3m). Return on Total Invested Capital ("ROTIC") progressed to 22.7% (2022: 20.6% adjusted as explained in the Chief Financial Officer's report) . Statutory profit before tax was £13.4m (2022: £16.0m), reflecting a full year impact of large adjusting items primarily arising from the amortisation of acquired intangible assets and of the premium on the shares issued in respect of the Geotek earnout.

The Group continued to invest in the improvement of its existing products and the development of new products. Investment in research and development amounted to £7.8m in 2023 (2022: £6.8m), equivalent to 5.7% of Group revenue (2022: 6.0%).

The 12% increase in Adjusted pre-tax profit did not produce a similar increase in EPS, due largely to the increase in tax rates in April 2023 from 19% to 25% and, to a lesser degree, to the issue of shares in respect of the Geotek earn-out. Adjusted earnings per share progressed by 3% to 374.6p from 363.8p; adjusted fully diluted earnings per share similarly progressed to 368.5p (2022: 359.0p). Statutory basic earnings per share were 145.8p (2022: 196.1p) and statutory diluted earnings per share were 143.5p (2022: 193.5p) affected by the large non-cash adjusting items.

Cashflow

Cash conversion was still impacted by caution and an appropriate desire to avoid any return to the lengthy delays for our customers that the long-persisting supply chain difficulties had caused. It was improved but lower than usual at 90% (2022: 80%), with cash generated from operations of £31.3m (2022: £24.0m). Cash conversion is an essential element of our business model and we must strive to return to our pre Covid/Ukraine performance in this area.

Year-end cash balances decreased to £13.7m from £20.8m at 31 December 2022. Adjusted net debt (excluding IFRS 16 lease liabilities but including sums still due in respect of acquisitions) at the year-end amounted to £45.1 m (2022: £52.0m).

Corporate activity

Geotek, which the Group acquired in May 2022, delivered sufficient profits during that calendar year to trigger the payment of the maximum £35m earn-out, half payable in shares, half in cash. This was settled in the first half of 2023.

On 3 April 2023, the Group acquired 100% of the issued share capital of Henniker Scientific Limited ("Henniker"), a leading supplier of instruments, systems & technologies for plasma and surface science applications, supplying solutions for cleaning, surface activation to improve adhesion and functional nano-scale coatings, for a total price capped at £2.3m including £1.85m at completion and an earn-out capped at £0.46m.

On 2 May 2023, our subsidiary Dia-Stron acquired 100% of the issued share capital of Bossa Nova Vision LLC ("BNV"), a company specialising in imaging measurement technology for the cosmetics industry based in Los Angeles, California, USA, for $1.6m in cash.

Post year-end, on 1 February 2024, our subsidiary PE.fiberoptics acquired 100% of the shares of Luciol Instruments SA ("Luciol") for CHF 2m plus a potential earn-out capped at CHF 0.5m.

The Board believes that the BNV and Luciol transactions have synergistic potential with other businesses in our Group. Given the widening number of sectors we operate in, it naturally becomes more likely that we will acquire businesses adjacent to existing Group activities.

As a buy and build focused group, the acquisition of new businesses is a fundamental feature of the Group's strategy. Executing this effectively ensures that long-term value is generated for shareholders. We retain a strict acquisition discipline and are highly selective in relation to both the acquisition multiple and long-term quality of any potential addition to our Group.

The industry in which we operate contains a multitude of small global niches, as illustrated by the diverse nature of the new entrants to our Group. The UK is recognised in this arena as a centre of excellence for product innovation and manufacturing with world-leading businesses. Our Group has built a strong reputation over the past decade as an ethical, experienced and well-financed buyer and a supportive home for businesses in our sector whose owners wish to sell. We are trusted to act decisively and to complete deals under the initial terms agreed. For the businesses we acquire, the Group offers advice and support wherever necessary, stimulates intra-group cooperation, participates in succession planning and implements robust financial controls. We trust subsidiary management teams with the day-to-day running of their businesses. This has been a successful operating model for the Group, as management teams are given responsibility for their own destinies, as well as an environment in which they can thrive.

Dividends

The Board is recommending a final dividend of 68p per share subject to approval at the forthcoming Annual General Meeting on 21 May 2024, which will make a total distribution of 95p per share in respect of 2023 (2022: 81p per share). The total dividend per share is 3.9 times covered by adjusted earnings per share (2022: 4.5 times). Our policy of increasing the dividend by a minimum of 10% per year remains sustainable as long as we have ample cover.

The proposed final dividend, if approved by shareholders, will be payable on Friday 5 July 2024 to shareholders on the register on Friday 7 June 2024. The shares will go ex-dividend on Thursday 6 June 2024.

The Company's shareholders are reminded that a Dividend Reinvestment Plan (DRIP) is in place to enable shareholders to automatically reinvest their dividends into additional Judges shares should they so wish. 

Trading environment

The long-term fundamentals supporting demand for scientific instruments and related techniques and services remain positive. In addition to the global expansion of higher education, market demand is driven by continuing strong worldwide growth of scientific research across academic, corporate, and industrial sectors, and the increasing number of industrial applications for scientific techniques and technologies driven by the enduring pursuit for process control and optimisation. Of course, control and optimisation require measurement.

In parallel to these positive long-term trends, the markets across which Judges and its peers operate are also characterised by a degree of shorter-term variability, influenced mostly by government spending, research funding, currency fluctuations and the business climate in major trading blocs, particularly the USA and China. 

In the medium-term, the competing goals in the various jurisdictions where the Group operates, of stimulating recovery and of reducing ballooning government deficits should increase uncertainty in worldwide research funding. Whilst it now appears that inflation may finally be under control and interest rates could slowly decline, government debt worldwide is an issue and may cause the return of austerity.

As a large percentage of the Group's revenue is overseas, exchange rates have a significant influence on the Group's business. Judges' manufacturing costs are largely denominated in Sterling and most of the Group's revenue originates from countries where the standard of value is the US Dollar (approximately one half of total revenue) or the Euro (around one third of total revenue). The currency movements since the Brexit referendum vote in 2016 have had a positive influence on our margins and our competitiveness; exchange rates have continued to remain favourable to our Group although Sterling firmed up toward the year-end.

Outlook

Judges' business is very international and thrives with peace and free trade. The macro environment remains uncertain, and while the disruptions due to Covid and the war in Ukraine have now receded, the after-effect of budget deficits may still make itself felt on research budgets in the years to come. Despite the elevated tensions in the world, which are of great concern, the resilience and adaptability of the Group, combined with supportive long-term drivers, provide confidence in the ongoing delivery of durable returns for shareholders.

For the immediate future, the new year has started with a healthy order book; order intake for the first eleven weeks of the year has been marginally below the 2023 comparative which included an exceptionally large post-lockdown contribution from China. At this point, we are still envisaging another coring expedition during the course of 2024, however, Geotek has not yet contracted for this expedition and there is uncertainty regarding its timing and the amount of any related revenue to be recognised in 2024.

Exchange rates remain favourable to the Group's competitive position but this year will see the final impact of the April 2023 corporation tax rate increases. The Board remains comfortable with current market expectations.

David Cicurel

Chief Executive

20 March 2024

Chief Financial Officer's Report

The Group's strategy is based on acquiring companies within the scientific instruments sector and ensuring continued profitable performance and growth at its existing subsidiary businesses.

Key Performance Indicators

The Group's financial Key Performance Indicators ("KPIs"), which are aligned with the ability to deliver Organic growth, reduce acquisition debt and fund dividend payments to shareholders, are Adjusted basic earnings per share, Adjusted Organic operating margins, Organic return on total invested capital and cash conversion. We have a further non-financial KPI of Organic order intake which is the bellwether of future short-term financial performance. All five KPIs are commented on during this report.

	2023	2022
Adjusted basic earnings per share	374.6p	363.8p
Adjusted Organic operating profit margin	20.5%	21.5%
Organic return on total invested capital	33.5%	28.7%
Cash conversion	90%	80%
Organic order intake	+7%	+0.5%

Alternative performance measures

The Group uses alternative performance measures ("APMs") in order to provide readers of the accounts with a clearer picture of the Group's actual trading performance and future prospects. Amongst these measures are: (1) Organic, which describes the performance of the Group only including those businesses acquired prior to the start of the comparative period, and for these accounts the reference date is 1 January 2022; (2) Adjusted earnings figures, which exclude adjusting items (as disclosed in note 3); (3) Adjusted net debt, which (a) includes acquisition payables not yet settled at the Balance sheet date and (b) excludes IFRS 16 lease liabilities; and (4) Return on total invested capital and cash conversion which are defined within the relevant sections of this report.

Revenue

Group revenues increased from £113.2m in 2022 to £136.1m, an increase of 20%. Organic revenues improved by 15% (2022: Organic growth of 8%) supported by a strong opening order book and full year Organic order intake, itself ahead of 2022 by 7%. The remainder of the increased revenue arose from a full year's ownership of Geotek and from the two small acquisitions of Henniker and BNV during the year.

Across our two segments, Materials Sciences total revenues rose by £12.6m to £72.5m (2022: £59.9m) and Vacuum revenues increased by £10.3m to £63.6m (2022: £53.3m).

Profits

Adjusted operating profit increased from £30.1m to £34.8m as a result of the strong revenue growth. We benefited from improved supply chain conditions which allowed our Organic businesses to deliver a higher capacity and whilst costs did increase, as travel and marketing returned to more normal pre-Covid levels, we were able to offset this with suitably balanced price increases, the consequence of which meant that we were able to maintain our Organic operating margins (before central costs) however Adjusted Organic operating margins reduced from 21.5% to 20.5% due to increased central costs, including the recruitment of one additional executive director. Total Adjusted operating margin similarly reduced from 26.6% to 25.6%.

Sterling remained stable on average against both the Euro and US Dollar across the year which enabled us to maintain our competitiveness as a high exporter and, overall, exchange rates continue to be usefully positioned for the Group.

Statutory operating profit increased to £21.6m (2022: £18.2m), and statutory profit before tax was £13.4m compared to £16.0m in 2022. Both figures were affected by significantly increased adjusting items, which are detailed further below and, for the profit before tax figure, also increased borrowing costs.

Capitalisation of development costs

We capitalised £1.2m (2022: £1.5m) of our total R&D expense relating to development of new or significantly improved products. Amortisation on the total amounts capitalised (inclusive of prior years) is £0.4m (2022: £0.1m) reflecting an increase in the number of completed projects this year. Many projects are still not yet commercialised, often due to long lead times in acquiring parts to complete prototypes, and hence these products are not yet production ready.

Adjusting items

£18.3m of pre-tax adjusting items were recorded in 2023 (2022: £12.3m). The two main constituents were £11.8m of amortisation of the intangible assets recognised upon acquisition (2022: £8.4m), primarily arising as a result of the acquisition of Geotek, together with a £4.0m charge primarily relating to the difference between the market value of the new Judges shares issued for the equity component of the Geotek earn-out compared 31 December 2022 share price. IFRS prohibits adjusting the total acquisition consideration for the post-acquisition change in share price so it is instead recorded as an expense.

Finance costs

Net finance costs (excluding adjusting items) totalled £3.1m (2022: £1.8m). The higher interest charge reflects (i) a full year of holding a higher debt following the May 2022 acquisition of Geotek, which was fixed at approximately 5% (including margin) via an interest rate swap taken out in 2022, (ii) an additional net £10m borrowed in 2023 as part of settling the cash element of the Geotek earn-out and is unhedged at higher interest rates.

The vast majority of the Group's borrowings are hedged, which ensures that a risk of rising or consistently higher interest rates has been mitigated for the duration of the Group's existing facilities.

Statutory net finance costs were £8.2m (2022: £2.2m). The two key items reconciling between the Adjusted and statutory figures are a £4.0m expense for the fair value movements on the Geotek deferred consideration (2022: £2.6m) and a £1.2m debit relating to the valuation of the interest rate hedging (2022: £2.3m credit).

Taxation

The Group's tax charge arising from Adjusted profit before tax was £6.9m (2022: £4.9m). The effective tax rate on Adjusted profits of 21.8% compares with 17.2% in 2022 and the percentage increase is largely related to the increase in UK corporation tax rates at the start of April 2023 from 19% to 25%, as was signposted to shareholders in last year's annual report. This 6% increase for three-quarters of the year mathematically equates to a 4.5% rate increase, and therefore aligns closely to the increase in the effective tax rate. For 2024, we expect to have a full year of the 6% increase, such that the Group's tax rate will again rise closer to the UK's prevailing rate.

One upside relating to tax, was announced by the UK government during 2023 in relation to changes to the UK research and development tax scheme which improves the credit attainable from the large companies R&D scheme, such that there is less of a gap between the benefits attainable under small and large companies R&D schemes.

Earnings per share

Adjusted basic earnings per share improved by 3% to 374.6p from 363.8p and Adjusted diluted earnings per share was a similar percentage higher at 368.5p (2022: 359.0p). This small increase in Adjusted earnings per share compares with a 12% increase in Adjusted profit before tax. The aforementioned 4.5% increase in effective tax rate equates to over £1.4m additional tax payable which is approximately 22p of earnings per share. Without this tax rate change in 2023, Adjusted basic earnings per share would have been 396.6p.

Statutory basic and diluted earnings per share have significantly reduced as a result of the higher adjusting items as explained in the Adjusting items section of this report. Statutory basic earnings per share was 145.8p (2022: 196.1p) and statutory diluted earnings per share totalled 143.5p (2022: 193.5p).

Order intake

Organic order intake for 2023 was 7% above the prior year figure, and remained ahead of revenue for most of the year. Your Board considers order intake and the resultant year-end order book as an important bellwether to the Group's ability to achieve its expected results, and this intake resulted in a closing Organic order book at 31 December 2023 of 17.0 weeks of budgeted sales (31 December 2022: 21.1 weeks). Total order book was 16.2 weeks inclusive of the acquisitions of Henniker and BNV. For 2024 Geotek is now part of the Organic group of companies.

Adjustment to 2022 Geotek acquisition consideration

During review of the settlement of the Geotek contingent consideration, it was identified that the contingent consideration balance should have been £2.2m higher at the acquisition date with a corresponding increase in Goodwill, as the equity share component of the contingent consideration should have been measured by reference to the fair value of the Judges share price. This adjustment therefore had no impact on net assets at 31 December 2022 and had no impact on profit for the year ended 31 December 2022.

Return on Capital

The Group closely monitors the return it derives on the capital invested in its subsidiaries. The annual rate of Return on Total Invested Capital ("ROTIC") at 31 December 2023 on an Organic basis was 33.5% (2022: 28.7%). This is as a result of overall performance improvement during 2023 whilst noting some variability in the performance of our group of businesses.

The annual rate of ROTIC is calculated by comparing attributable earnings excluding central costs, adjusting items and before interest, tax and amortisation ("EBITA") with the amounts invested in plant and equipment, net current assets (excluding cash) and unamortised intangible assets and goodwill (as recognised at the initial acquisition date) together with any acquisition costs and any increases to acquisition consideration post-acquisition date.

Last year we presented an Organic and total ROTIC as a result of the effect of the significant acquisition of Geotek, which was both the largest and highest multiple paid in Judges' history. Within the ROTIC calculation, we have finalised the total consideration for this acquisition, and it reflects the value of the equity component of the earn-out having increased from £17.5m to £23m on settlement. This increase has accordingly been included within the ROTIC calculation from the date of acquisition. The consequential effect of the Geotek acquisition, on the Group's total ROTIC, adjusted to the date of acquisition, was a reduction of 8.1% and hence total ROTIC was amended to 20.6% at 31 December 2022. The overall Group figure for the year ended 31 December 2023 progressed to 22.7%.

Dividends

For the financial year ended 31 December 2023 the Company paid an interim dividend of 27.0p per share in November 2023 (2022: 22.0p per share). Following a good performance in 2023, albeit with earnings per share impacted by the increased corporate tax rates, the Board is recommending a final dividend of 68.0p per share giving a 17% increase in the total dividend for the year of 95.0p per share (2022: 81.0p per share). Dividend cover is approximately 3.9 times Adjusted basic earnings per share (2022: 4.5 times).

The Group's policy is to pay a progressively increasing dividend, with an annual minimum increase of at least 10% (dependent on the Group's performance), covered by earnings provided the Group retains sufficient cash and borrowing resources with which to pursue its longstanding acquisition strategy.

Headcount

The Group's full time equivalent ("FTE") employees for 2023 stood at 682 (2022: 595). This growth reflects recruitment in support of the Group's long-term growth strategy, the acquisitions of Henniker and BNV, coupled with a full year effect of our May 2022 acquisition of Geotek.

Share capital and share options

The Group's issued share capital at 31 December 2023 totalled 6,615,717 Ordinary shares (2022: 6,369,746). The vast majority of the shares issued during 2023 were to satisfy acquisition consideration for the Geotek earnout. The remaining share issues related to the exercise of share options by various members of staff during the year and settlement in ordinary shares of a portion of the introduction fee payable to Charles Holroyd for the acquisition of Geotek (see note 9 for further details).

Share options issued during the year under the 2015 scheme totalled 85,759 (2022: 4,735), most of which were issued to the Executive Directors, and the total share options in issue at the year-end under both the 2005 and 2015 schemes amounted to 254,169 (2022: 184,740).

Defined benefit pension scheme

The Group has a defined benefit pension scheme which was acquired with Armfield in 2015. This scheme has been closed to new members from 2001 and closed to new accrual in 2006. The latest triennial full actuarial valuation was performed in March 2023 which resulted in a surplus for the scheme with no further deficit reduction contributions being required. Previous annual contributions were £0.4m.

The Group accounts for post-retirement benefits in accordance with IAS 19 Employment Benefits. The Consolidated balance sheet reflects the net surplus or deficit on the pension scheme, based on the market value of the assets of the scheme and the valuation of liabilities using year end AA corporate bond yields. At 31 December 2023, the pension scheme was in a position of a £1.1m surplus (net of deferred tax) (31 December 2022: £0.9m net surplus). This movement is explained through an improved fund asset performance offset by the higher deferred tax rate.

Following the outcome of the triennial valuation, the Trustees of the scheme took steps to secure the pension surplus by aligning the asset management strategy with the expected future pension outflows to the members of the scheme.

In March 2024, the Trustees entered into a buy-in policy with an insurance company. This policy secures payment of all future pensions due to the scheme's members in relation to their pensions.

Cashflow and net debt

The Group has an enduring track record of converting profits into cash and this year's profitable trading delivered a strong cash performance with cash generated from operations of £31.3m (2022: £24.0m). Our cash conversion rate, which compares cash generated from operations with Adjusted operating profit, was 90%, an improvement on 2022's 80% but still below our expectations of a 90+% conversion rate. Whilst global supply chain issues abated and allowed us to increase capacity this year, we still were faced with many of our businesses feeling the need to maintain historically high inventory levels, partly due to supply chain conservatism. We are keenly aware that reducing component levels will be essential as part of good working capital management in driving our expected cash conversion, but it is not a quick fix when managing important supplier relationships for the long-term.

Total capital expenditure on property, plant and equipment amounted to £4.7m (2022: £6.4m). Whilst nearly £2m lower than 2022, this year's figure remains higher than usual due to ongoing property purchases and/or refurbishments for our trading businesses as a number have either moved or are in the process of moving facility.

We started this year with £52.0m of Adjusted net debt and ended the year with £45.1m. Adjusted net debt includes acquisition-related cash payables that had yet to be settled at the balance sheet date and excludes IFRS 16 liabilities. The Group uses Adjusted net debt rather than statutory net debt, as this figure includes actual cash liabilities arising from acquisitions which are due within one year. Gearing, calculated as the proportion of Adjusted net cash/debt compared to Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA"), at 31 December 2023 was 1.38 times (2022: 1.6 times). We remain committed to maintaining a prudent gearing position whilst at the same time taking the opportunities of acquiring strong, sound businesses at disciplined multiples. We acquired Henniker and BNV for a combined cash consideration of £3.6m (including contingent consideration). We also paid £5.7m of dividends to shareholders, £4.8m for our tax liabilities, and invested £4.7m in capital expenditure; an overall £18.8m outflow and we still managed to decrease net debt by £6.9m. This illustrates to shareholders the Group's cash generating capability and its ability to de-leverage. In 2023, we also settled the full Geotek earn-out, paying £17.5m cash (the full earn out was £35m and was payable 50% in cash and 50% in new Judges shares) although this amount was already largely captured within Adjusted net debt at the start of the year.

Our Group's multi-bank facility ("Facility") with Lloyds Banking Group plc, Santander UK plc and Bank of Ireland (the "Banks") is for an aggregate £100m consisting of a £25m term loan ("Term Loan"), a committed £55m revolving credit facility ("RCF") plus a £20m uncommitted accordion facility, which can be drawn with the agreement of the Banks and had a four-year term expiring on 25 May 2026 ("Borrowing Term").

The Term Loan amortises on a straight line basis over the Borrowing Term by quarterly instalments. The RCF is repayable in a bullet at the end of the Borrowing Term.

The banking covenants are:

·    Gearing no greater than 3.0 times Adjusted EBITDA; and

·    Interest cover no less than 3.0 times.

Interest rate margins are consistent with the previous facilities, save for an additional rate between 2.5 and 3.0 times gearing.

This Facility provides the Group, in support of its buy and build strategy, with greater acquisition capacity, both in terms of higher frequency and of size.

At the year end the Term Loan was £14.1m (2022: £20.3m) and the RCF was £44.3m drawn (2022: £35.3m drawn), with £10.7m available to drawdown for future acquisitions alongside the £20m accordion should it be required to be converted from uncommitted to committed borrowings.

We continue to greatly appreciate the unwavering support of our three long-term relationship lenders, Lloyds Banking Group plc, Santander UK plc and Bank of Ireland, who all understand and champion the execution of the Group's buy and build strategy.

Year-end cash balances totalled £13.7m (2022: £20.8m). In previous years when the Group had low net debt and interest rates were lower, there was little effect on the Group's performance in maintaining optimised levels of cash compared with paying down debt, however with higher net debt and in this higher interest rate environment, there is a greater benefit for shareholders in carrying a lower level of cash to allow unhedged debt to be repaid as and when cashflows allow. Whilst rates remain higher, we will continue to encourage our businesses to improve their working capital positions to generate higher cash conversion, in order that we can repay unhedged debt as quickly as possible, subject to our usual caveat of funding future acquisitions.

Overall, 2023 was positive for the Group, supported by a team that continue to deliver improvements every year, despite the wider economic and geopolitical challenges that abound. Organic growth continued, cash generation improved, and we maintained a healthy balance sheet with conservative leverage. Consequently, we remain well positioned to continue the Group's strategy of delivering growth in earnings via selective, reasonably priced acquisitions of strong niche businesses in the scientific instruments sector, alongside encouraging long-term organic growth in its existing group of businesses.

Brad Ormsby

Chief Financial Officer

20 March 2024

Consolidated statement of comprehensive income

For the year ended 31 December 2023

	Note	Adjusted £m	Adjusting items £m	2023 Total £m	Adjusted £m	Adjusting items £m	2022 Total £m
Revenue	2	136.1	-	136.1	113.2	-	113.2
Operating costs	2,3	(101.3)	(13.2)	(114.5)	(83.1)	(11.9)	(95.0)
Operating profit/(loss)		34.8	(13.2)	21.6	30.1	(11.9)	18.2
Interest income		0.3	0.1	0.4	0.2	-	0.2
Interest expense		(3.4)	(5.2)	(8.6)	(2.0)	(0.4)	(2.4)
Profit/(loss) before tax		31.7	(18.3)	13.4	28.3	(12.3)	16.0
Taxation (charge)/credit		(6.9)	3.4	(3.5)	(4.9)	1.7	(3.2)
Profit/(loss) for the year		24.8	(14.9)	9.9	23.4	(10.6)	12.8
Attributable to:
Owners of the parent		24.4	(14.9)	9.5	23.1	(10.6)	12.5
Non-controlling interests		0.4	-	0.4	0.3	-	0.3
Profit/(loss) for the year		24.8	(14.9)	9.9	23.4	(10.6)	12.8
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Retirement benefits actuarial gain				0.1			2.1
Deferred tax on retirement benefits actuarial gain				-			(0.5)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign subsidiaries				(0.1)			0.1
Other comprehensive income for the year, net of tax				-			1.7
Total comprehensive income for the year				9.9			14.5
Attributable to:
Owners of the parent				9.5			14.2
Non-controlling interests				0.4			0.3

		2023 Pence		2023 Pence	2022 Pence		2022 Pence
Earnings per share - adjusted
Basic	1	374.6			363.8
Diluted	1	368.5			359.0
Earnings per share - total
Basic	1			145.8			196.1
Diluted	1			143.5			193.5

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated balance sheet

As at 31 December 2023

	Note	2023 £m	2022 (restated) £m
ASSETS
Non-current assets
Goodwill	4	54.8	53.6
Other intangible assets	5	35.6	44.4
Property, plant and equipment		19.8	15.9
Right-of-use leased assets		6.6	4.2
Retirement benefit surplus		1.4	1.2
		118.2	119.3
Current assets
Inventories		26.5	22.3
Trade and other receivables		25.1	25.6
Cash and cash equivalents		13.7	20.8
		65.3	68.7
Total assets		183.5	188.0
LIABILITIES
Current liabilities
Trade and other payables		(24.6)	(25.9)
Payables relating to acquisitions		(0.5)	(36.5)
Borrowings	6	(6.2)	(6.2)
Right-of-use lease liabilities		(1.2)	(1.0)
Current tax liabilities		(2.5)	(2.2)
		(35.0)	(71.8))
Non-current liabilities
Borrowings	6	(52.2)	(49.4)
Right-of-use lease liabilities		(5.7)	(3.3)
Deferred tax liabilities		(8.0)	(9.0)
		(65.9)	(61.7)
Total liabilities		(100.9)	(133.5)
Net assets		82.6	54.5
EQUITY
Share capital		0.3	0.3
Share premium account		17.7	17.2
Other reserves		26.9	4.1
Retained earnings		37.5	32.7
Equity attributable to owners of the parent company		82.4	54.3
Non-controlling interests		0.2	0.2
Total equity		82.6	54.5

Consolidated statement of changes in equity

For the year ended 31 December 2023

	Share  capital £m	Share premium £m	Other  reserves £m	Retained earnings £m	Total attributable to owners of the parent £m	Non-controlling interests £m	Total equity £m
At 1 January 2023	0.3	17.2	4.1	32.7	54.3	0.2	54.5
Dividends	-	-	-	(5.7)	(5.7)	(0.4)	(6.1)
Issue of share capital	-	0.5	22.9	-	23.4	-	23.4
Purchase of own shares for Company reward scheme	-	-	-	(0.1)	(0.1)	-	(0.1)
Tax on Company reward scheme shares awarded	-	-	-	(0.1)	(0.1)	-	(0.1)
Deferred tax on share-based payments	-	-	-	(0.1)	(0.1)	-	(0.1)
Share-based payments	-	-	-	1.2	1.2	-	1.2
Transactions with owners	-	0.5	22.9	(4.8)	18.6	(0.4)	18.2
Profit for the year	-	-	-	9.5	9.5	0.4	9.9
Retirement benefit actuarial gain	-	-	-	0.1	0.1	-	0.1
Foreign exchange differences	-	-	(0.1)	-	(0.1)	-	(0.1)
Total comprehensive income for the year	-	-	(0.1)	9.6	9.5	0.4	9.9
At 31 December 2023	0.3	17.7	26.9	37.5	82.4	0.2	82.6
At 1 January 2022	0.3	16.7	2.0	23.8	42.8	0.6	43.4
Dividends	-	-	-	(4.4)	(4.4)	-	(4.4)
Change in non-controlling interest	-	-	2.0	(1.4)	0.6	(0.7)	(0.1)
Issue of share capital	-	0.5	-	-	0.5	-	0.5
Purchase of own shares for Company reward scheme	-	-	-	(0.1)	(0.1)	-	(0.1)
Share-based payments	-	-	-	(4.4)	(4.4)	-	(4.4)
Transactions with owners	-	0.5	2.0	(5.2)	(2.7)	(0.7)	(3.4)
Profit for the year	-	-	-	12.5	12.5	0.3	12.8
Retirement benefit actuarial gain	-	-	-	1.6	1.6	-	1.6
Foreign exchange differences	-	-	0.1	-	0.1	-	0.1
Total comprehensive income for the year	-	-	0.1	14.1	14.2	0.3	14.5
At 31 December 2022	0.3	17.2	4.1	32.7	54.3	0.2	54.5

Consolidated cashflow statement

For the year ended 31 December 2023

	2023 £m	2022 £m
Cashflows from operating activities
Profit after tax	9.9	12.8
Adjustments for:
Financial instruments measured at fair value: hedging contracts	1.2	(2.3)
Share-based payments	1.2	0.7
Depreciation of property, plant and equipment	1.9	1.4
Depreciation of right-of-use leased assets	1.3	1.1
Amortisation of acquired intangible assets	11.8	8.4
Amortisation of internally generated intangible assets	0.4	0.1
Interest income	(0.3)	(0.2)
Interest expense	3.0	1.8
Interest payable on right-of-use lease liabilities	0.4	0.2
Fair value movement on contingent consideration (note 7)	4.0	2.6
Retirement benefit obligation net finance income	(0.1)	-
Contributions to defined benefit plans	-	(0.4)
Tax expense recognised in the Consolidated statement of comprehensive income	3.5	3.2
Increase in inventories	(5.1)	(4.2)
Increase in trade and other receivables	(0.3)	(3.1)
(Decrease)/increase in trade and other payables	(1.5)	1.9
Cash generated from operations	31.3	24.0
Tax paid	(4.8)	(2.1)
Net cash from operating activities	26.5	21.9
Cashflows from investing activities
Paid on acquisition of subsidiaries	(3.1)	(45.0)
Payment in respect of surplus working capital	(1.2)	(17.8)
Paid in respect of earn-out	(17.5)	-
Gross cash inherited on acquisition	1.5	19.6
Acquisition of subsidiaries, net of cash acquired	(20.3)	(43.2)
Purchase of property, plant and equipment	(4.7)	(6.4)
Capitalised development costs	(1.2)	(1.5)
Proceeds on disposal of property, plant and equipment	-	0.1
Interest received	0.3	0.2
Net cash used in investing activities	(25.9)	(50.8)
Cashflows from financing activities
Proceeds from issue of share capital	0.5	0.3
Purchase of own shares for Company reward scheme	(0.1)	(0.1)
Tax on shares awarded under Company scheme	(0.1)	-
Finance costs paid	(3.0)	(1.8)
Repayments of borrowings*	(9.2)	(6.5)
Repayments of right-of-use lease liabilities	(1.6)	(1.3)
Proceeds from bank loans*	12.0	45.1
Equity dividends paid	(5.7)	(4.4)
Dividends paid to non-controlling interest	(0.4)	-
Paid on acquisition of non-controlling interest in subsidiary	-	(0.1)
Net cash from/(used in) financing activities	(7.6)	(31.2)
Net change in cash and cash equivalents	(7.0)	2.3
Cash and cash equivalents at the start of the year	20.8	18.4
Exchange movements	(0.1)	0.1
Cash and cash equivalents at the end of the year	13.7	20.8

* On 23 May 2022, £15.2 million of outstanding loans were repaid and £60.3 million was simultaneously reborrowed as the Group renewed its banking facilities (see Note 6).

Notes to the Final Results

For the year ended 31 December 2023

1.   Earnings per share

	Note	2023 £m	2022 £m
Profit attributable to owners of the parent
Adjusted profit		24.4	23.1
Adjusting items	3	(14.9)	(10.6)
Profit for the year		9.5	12.5

		Pence	Pence
Earnings per share - adjusted
Basic		374.6	363.8
Diluted		368.5	359.0
Earnings per share - total
Basic		145.8	196.1
Diluted		143.5	193.5

		Number	Number
Issued Ordinary shares at the start of the year		6,369,746	6,318,415
Movement in Ordinary shares during the year		245,971	51,331
Issued Ordinary shares at the end of the year		6,615,717	6,369,746
Weighted average number of shares in issue		6,514,028	6,342,759
Dilutive effect of share options		106,816	85,077
Weighted average Ordinary shares in issue on a diluted basis		6,620,844	6,427,836

Adjusted basic earnings per share is calculated on the adjusted profit, which excludes any adjusting items, attributable to the Company's shareholders divided by the weighted average number of shares in issue during the year.

Adjusted diluted earnings per share is calculated on the adjusted basic earnings per share, adjusted to allow for the issue of Ordinary shares on the assumed conversion of all dilutive share options and any other dilutive potential Ordinary shares. The calculation is based on the treasury method prescribed in IAS 33. This calculates the theoretical number of shares that could be purchased at the average middle market price in the period out of the proceeds of the notional exercise of outstanding options. The difference between this theoretical number and the actual number of shares under option is deemed liable to be issued at nil value and represents the dilution.

Total earnings per share are calculated as above whilst substituting total profit for adjusted profit.

2.   Segmental analysis

For the year ended 31 December 2023	Note	Materials Sciences £m	Vacuum £m	Head office £m	Total £m
Revenue		72.5	63.6	-	136.1
Adjusted operating costs		(51.7)	(45.0)	(4.6)	(101.3)
Adjusted operating profit		20.8	18.6	(4.6)	34.8
Adjusting items	3				(13.2)
Operating profit					21.6
Net interest expense					(8.2)
Profit before tax					13.4
Income tax charge					(3.5)
Profit for the year					9.9

For the year ended 31 December 2022	Note	Materials Sciences £m	Vacuum £m	Head office £m	Total £m
Revenue		59.9	53.3	-	113.2
Operating costs		(41.6)	(38.2)	(3.3)	(83.1)
Adjusted operating profit		18.3	15.1	(3.3)	30.1
Adjusting items	3				(11.9)
Operating profit					18.2
Net interest expense					(2.2)
Profit before tax					16.0
Income tax charge					(3.2)
Profit for the year					12.8

Head office items relate to the Group's head office costs.

Segment assets and liabilities

At 31 December 2023	Materials Sciences £m	Vacuum £m	Head office £m	Total £m
Assets	52.8	41.6	89.1	183.5
Liabilities	(24.1)	(13.1)	(63.7)	(100.9)
Net assets	28.7	28.5	25.4	82.6
Capital expenditure	2.2	2.5	-	4.7
Depreciation of property, plant and equipment	1.1	0.8	-	1.9
Depreciation of right-of-use leased assets	0.9	0.4	-	1.3
Amortisation of acquired intangible assets	11.1	0.7	-	11.8
Amortisation of internally generated intangible assets	0.1	0.3	-	0.4

At 31 December 2022	Materials Sciences £m	Vacuum £m	Head office £m (restated)	Total £m
Assets	54.7	38.4	94.9	188.0
Liabilities	(24.4)	(11.7)	(97.4)	(133.5)
Net assets	30.3	26.7	(2.5)	54.5
Capital expenditure	0.5	5.9	-	6.4
Depreciation of property, plant and equipment	0.6	0.7	0.1	1.4
Depreciation of right-of-use leased assets	0.6	0.4	0.1	1.1
Amortisation of acquired intangible assets	7.3	1.1	-	8.4
Amortisation of internally generated intangible assets	0.0	0.1	-	0.1

Head office items include borrowings, intangible assets and goodwill arising on acquisition, deferred tax, defined benefit obligations and parent company net assets.

2.   Segmental analysis (continued)

Analysis of revenue by geographical areas

	Revenue			Non-current assets
Geographic analysis	Year to 31 December 2023 £m	Year to 31 December 2022 £m		Year to 31 December 2023 £m	Year to 31 December 2022 £m
UK (domicile)	14.7	13.3		117.3	118.5
Rest of Europe	33.7	32.3		-	-
North America	37.9	31.9		0.8	0.7
China/Hong Kong	18.4	13.9		-	-
Rest of the World	31.4	21.8		0.1	0.1
	136.1	113.2		118.2	119.3

Segmental revenue is presented on the basis of the destination of the goods where known, otherwise the geographical location of customers is utilised.

Analysis of revenue by performance obligation

	2023 £m	2022 £m
Sale of goods, recognised at a point in time	117.0	98.4
Sale of services, recognised at a point in time	4.3	3.7
Sale of services, recognised over time	14.8	11.1
	136.1	113.2

No customer makes up more than 10% of the Group's revenues.

3.   Adjusting items

	2023 £m	2022 £m
Amortisation of acquired intangible assets	11.8	8.4
Financial instruments measured at fair value: hedging contracts	-	(0.1)
Share-based payments	1.2	0.7
Employment taxes arising from share-based payments	-	(0.1)
Acquisition costs (note 7)	0.2	3.0
Total adjusting items in operating profit	13.2	11.9
Fair value movement on contingent consideration (note 7)	4.0	2.6
Retirement benefits obligation net interest income	(0.1)	-
Financial instruments measured at fair value: interest rate swaps	1.2	(2.2)
Total adjusting items	18.3	12.3
Taxation	(3.4)	(1.7)
Total adjusting items net of tax	14.9	10.6
Attributable to:
Owners of the parent	14.9	10.6
Non-controlling interest	-	-
	14.9	10.6

4.   Goodwill

	2023 £m	2022 (restated) £m
Cost
1 January	53.6	18.7
Acquisitions (note 7)	1.2	34.9
31 December	54.8	53.6

£45.7m of goodwill resides in the Material Sciences segment (including £34.9m relating to Geotek) (2022: £45.3m) and £9.1m resides in the Vacuum segment (2022: £8.3m). There are 9 CGU's within the Material Sciences segment and 10 within the Vacuum segment. Goodwill is tested annually for impairment by reference to the value in use of each of the relevant cash-generating units it is allocated to and aggregated for disclosure purposes into the respective operating segments. The value in use is calculated on the basis of projected cashflows for five years together with the terminal value at the end of the five years, which is computed by reference to projected year six cashflows and discounted. There was no requirement for any impairment provision at 31 December 2023 (2022: £nil). The key assumptions in determining the value in use are:

Revenue and margins: These are derived from the detailed 2024 budgets which are built up with reference to markets and product categories with projected 6% medium term growth factors (2022: 6%). Projected margins reflect historical performance and the expected impact of efforts to improve operational efficiency.

Discount rate: Cashflows are discounted using a pre-tax discount rate of 16.5% (2022: 16.4%) per annum, calculated by reference to year‑end data on equity values and interest, dividend and tax rates.

Long-term growth rates: 2.1% long-term growth rate takes into account both UK and overseas industry growth expectations (2022: 2.1%).

The long-term growth rate and discount rate are consistent for all cash-generating units on the basis that the businesses operate in similar markets and are exposed to similar risks.

The Directors have considered the sensitivity of the key assumptions, including the discount rate and long-term growth rates, and have concluded that any possible changes that may be reasonably contemplated in these key assumptions would not result in the value in use falling below the carrying value of goodwill, given the amount of headroom available, and the conservative nature of the assumptions.

2022 has been restated to reflect adjustment to the Geotek acquisition consideration (see note 7).

5.   Other intangible assets

	Internally generated development costs £m	Acquired distribution agreements £m	Acquired technology £m	Acquired sales order backlog £m	Acquired  brand and domain names £m	Acquired customer relationships £m	Total £m
Gross carrying amount
1 January 2022	0.7	3.8	12.6	5.5	13.6	11.3	47.5
Acquisitions	-	-	22.8	5.3	1.8	16.5	46.4
Additions	1.5	-	-	-	-	-	1.5
31 December 2022	2.2	3.8	35.4	10.8	15.4	27.8	95.4
Acquisitions (note 7)	-	-	1.3	0.2	-	0.7	2.2
Additions	1.2	-	-	-	-	-	1.2
31 December 2023	3.4	3.8	36.7	11.0	15.4	28.5	98.8
Amortisation
1 January 2022	-	3.7	10.6	5.5	12.7	10.0	42.5
Charge for the year	0.1	0.1	2.7	2.1	0.6	2.9	8.5
31 December 2022	0.1	3.8	13.3	7.6	13.3	12.9	51.0
Charge for the year	0.4	-	4.0	3.4	0.6	3.8	12.2
31 December 2023	0.5	3.8	17.3	11.0	13.9	16.7	63.2
Carrying amount 31 December 2023	2.9	-	19.4	-	1.5	11.8	35.6
Carrying amount 31 December 2022	2.1	-	22.1	3.2	2.1	14.9	44.4
Carrying amount 31 December 2021	0.7	0.1	2.0	-	0.9	1.3	5.0

The key assumptions in valuing the acquired intangible assets of technology and customer relationships at the date of acquisition are:

Discount rate: Cashflows are discounted using a pre-tax discount rate ranging between 16% to 17% per annum. (2022: 15.5%)

Long-term growth rates: 2-2.9% long-term revenue growth rate takes into account both UK and overseas markets and 3% cost growth to maintain margin which broadly aligns with long-term inflation.

Included in the above is Geotek customer relationships and acquired technology with carrying value £11.2m and £17.5m respectively.

6.   Borrowings

	2023 £m	2022 £m
Current
Bank loans	6.2	6.2
	6.2	6.2
Non-current
Bank loans	52.2	49.4
	52.2	49.4

The movement in borrowings over the year was as follows:

	2023 £m	2022 £m
At 1 January	55.6	17.0
Proceeds from drawdown of loans	12.0	45.1
Repayment of loans	(9.2)	(6.5)
Interest payable - non cash	3.0	1.8
Interest paid - cash	(3.0)	(1.8)
At 31 December	58.4	55.6

6.   Borrowings (continued)

On 23 May 2022, the Group entered into a new £100m multi-bank facility ("Facility") with Lloyds Banking Group plc, Santander UK plc and Bank of Ireland (the "Banks") which replaced its existing unilateral banking arrangements with Lloyds Bank, which were for an aggregate amount of £60m. The initial consideration for the acquisition of Geotek was financed from this Facility.

The Facility is for an aggregate £100m consisting of a £25m term loan ("Term Loan"), a committed £55m revolving credit facility ("RCF") plus a £20m uncommitted accordion facility, which can be drawn with the agreement of the Banks. The Facility replaced the Group's previous facilities of which £15.2m was outstanding at the time of the acquisition of Geotek. The life of this new Facility is coterminous with the previous facility and therefore has a term of four years until 25 May 2026 ("Borrowing Term").

The Term Loan amortises on a straight line basis over the Borrowing Term by quarterly instalments. The RCF is repayable in a bullet at the end of the Borrowing Term.

During 2023, loans were drawn down in order to finance the cash element of the earn-out payable on the Geotek acquisition (2022: £45.1m net drawn down).

The banking covenants have been adjusted from the previous banking arrangements, namely:

·      Gearing no greater than 3.0 times Adjusted EBITDA (an increase from 2.5 times in the previous arrangement);

·      Interest Cover no less than 3 times; and

·      Minimum EBITDA covenant within the previous facilities is no longer required.

The group was in compliance with the above covenants throughout the year.

Interest rates are consistent with the previous facilities, save for an additional rate between 2.5 and 3.0 times gearing. The Banks have a fixed and floating charge over the Group's UK assets.

The existing lending facilities via Bordeaux Acquisition Limited ("Bordeaux") were unchanged at the date of the refinancing. Following Judges' purchase of the remaining 12% of Bordeaux on 27 June 2022, Bordeaux repaid in full its outstanding loan of £0.4m on 28 July 2022.

As at 31 December 2023, the Group's outstanding loans were as follows:

·      The term loan outstanding was £14,062,500 (2022: £20,312,500);

·      The committed RCF was £44,329,501 drawn (2022: £35,329,501); and

·      The accordion remained uncommitted and undrawn.

Borrowings mature as follows:

31 December 2023	Bank loans £m
Repayable in less than six months	4.6
Repayable in months seven to twelve	4.6
Current portion of long-term borrowings	9.2
Repayable in years one to five	55.9
Total borrowings	65.1
Less: interest included above	(6.7)
Less: cash and cash equivalents	(13.7)
Add: right-of-use lease liabilities	6.9
Statutory net debt	51.6
Less: right-of-use lease liabilities	(6.9)
Add: accrued acquisition consideration payable in cash	0.4
Adjusted net debt	45.1

6.   Borrowings (continued)

31 December 2022	Bank loans £m
Repayable in less than six months	4.5
Repayable in months seven to twelve	4.4
Current portion of long-term borrowings	8.9
Repayable in years one to five	54.7
Total borrowings	63.6
Less: interest included above	(8.0)
Less: cash and cash equivalents	(20.8)
Add: right-of-use lease liabilities	4.3
Statutory net debt	39.1
Less: right-of-use lease liabilities	(4.3)
Add: accrued acquisition consideration payable in cash	17.2
Adjusted net debt	52.0

7.   Acquisitions

Acquisition of Geotek Holding Limited and Geotek Coring Limited

During review of the settlement of the contingent consideration in the current year, it was identified that the contingent consideration balance should have been £2.2m higher at the acquisition date with a corresponding increase in Goodwill, as the equity share component of the contingent consideration should have been measured by reference to the fair value of the Judges share price. This adjustment had no impact on reported earnings for the year ended 31 December 2022 and had no impact on net assets at 31 December 2022.

The £35m earn-out on the acquisition was achieved in full, and was settled in June 2023. 50% (£17.5m) of the earn-out was satisfied in cash, financed in cash and via the Group's existing banking facilities (see note 6) and 50% was satisfied by the issue of 227,863 new Ordinary shares. To reflect the adjustment in fair value of the contingent consideration, which includes both unwinding of the discount relating to the cash liability and increase in the Judges share price between 31 December 2022, and the date of issue of the new Judges shares, a charge of £4.0m has been recognised in the Consolidated statement of comprehensive income, within adjusting items (see note 3). The issue of shares also increased the merger reserve by £22.9m.

Acquisition of Henniker Scientific Limited

On 3 April 2023, Judges Scientific acquired 100% of the entire issued share capital of Henniker Scientific Limited ("Henniker"), a leading supplier of instruments, systems & technologies for plasma and surface science applications, supplying solutions for cleaning, surface activation to improve adhesion, and functional nano-scale coatings.

The purchase price of Henniker consists of:

•    The initial consideration, paid in cash at completion, of £1.85m.

•    Contingent consideration up to a maximum of £0.46m to be satisfied in cash.

•    The contingent consideration becomes payable on achievement of a minimum adjusted EBIT of £0.46m for the year to 31 March 2024 increasing pro rata on a 4:1 ratio until it reaches a cap when an adjusted EBIT of £0.58m is achieved.

•    An additional payment for excess cash (surplus working capital) at completion over and above the ongoing requirements of the business, expected to be covered by the cash inherited at completion.

7.   Acquisitions (continued)

The summary provisional fair value of the cost of this acquisition includes the components stated below:

	Consideration	£m
	Initial cash consideration	1.8
	Contingent consideration	0.5
		2.3
	Gross cash inherited on acquisition	1.3
	Cash retained in the business	(0.1)
	Payment in respect of surplus working capital	1.2
	Total consideration	3.5
	Acquisition-related transaction costs charged to the Consolidated statement of comprehensive income	0.1

The payment in respect of surplus working capital was settled in July 2023.

Henniker has an accounting reference date of 31 March, which is not coterminous with the Group's accounting reference date. Following completion of the earn-out period, the accounting reference date will be aligned with the Group.

Acquisition of Bossa Nova Vision

On 2 May 2023, Judges Scientific's subsidiary, Dia-Stron Inc., acquired 100% of the entire issued share capital of Bossa Nova Vision LLC ("BNV"), a company specialising in imaging measurement technology for the cosmetics industry based in Los Angeles, California, USA.

The consideration for BNV was $1.6m (£1.3m) in cash, which was paid in May 2023.

Acquisition-related transaction costs charged to the Consolidated Statement of Comprehensive Income amounted to £0.1m.

The summary provisional fair values recognised for the assets and liabilities acquired from the two acquisitions during the period are as follows:

	Book value £m	Fair value adjustments £m	Fair value £m
Intangible assets	-	2.2	2.2
Inventories	0.2	-	0.2
Trade and other receivables	0.4	-	0.4
Cash and cash equivalents	1.5	-	1.5
Total assets	2.1	2.2	4.3
Deferred tax liabilities	-	(0.5)	(0.5)
Trade payables	(0.1)	-	(0.1)
Current tax liability	(0.1)	-	(0.1)
Total liabilities	(0.2)	(0.5)	(0.7)
Net identifiable assets and liabilities	1.9	1.7	3.6
Total consideration			4.8
Goodwill recognised			1.2

The intangible assets recognised reflect acquired customer relationships, the value of the acquired future committed order book, together with the acquired technology. A significant amount of the value of the acquired business is attributable to its workforce and sales knowhow and contributes to the goodwill recognised upon acquisition. £0.4m of goodwill has been allocated to the Materials Sciences segment in relation to the acquisition of BNV and £0.8m of goodwill has been recognised within the Vacuum segment in relation to Henniker. The intangible assets total is split between Henniker (£1.4m) and BNV (£0.8m).

The majority of the deferred tax liabilities recognised represent the tax effect which will result from the amortisation of the intangible assets, estimated using the tax rate substantively enacted at the balance sheet date.

7.   Acquisitions (continued)

These acquisitions resulted in revenue of £2.4m and a profit after tax (before adjusting items) attributable to owners of the parent company of £0.3m in the period post-acquisition. After amortisation of intangible assets, the contribution to owners of the parent company's results amounted to a loss of £0.1m after tax.

If these acquisitions had completed on 1 January 2023, revenue for the Group for the year ended 31 December 2023 would have increased by a further £0.9m and profit after tax (before adjusting items) attributable to the owners of the parent company would have increased by a further £0.1m. After amortisation of intangible assets, the contribution to owners of the parent company's results would have amounted to a loss of £0.3m after tax.

Acquisition of Luciol Instruments SA (post balance sheet event)

Post year-end, on 1 February 2024, the Group's subsidiary PE.fiberoptics acquired 100% of the shares of Luciol Instruments SA ("Luciol") for an initial cash consideration of CHF 2m plus a potential earn-out capped at CHF 0.5m. Due to the timing of this acquisition, full disclosures have not been provided, including fair value of acquired assets and liabilities. A payment in respect of surplus working capital totalling CHF 0.7m was made in February 2024, covered by the business's existing cash resources.

All acquisitions were made in line with group strategy.

8.   Dividends

	2023			2022
	Pence per share	£m		Pence per share	£m
Final dividend for the previous year	59.0	3.9		47.0	3.0
Interim dividend for the current year	27.0	1.8		22.0	1.4
Total final and interim dividend	86.0	5.7		69.0	4.4

The Directors will propose a final dividend of 68p per share, amounting to £4.8m, for payment on 7 July 2024. As the final dividend remains conditional on shareholders' approval at the Annual General Meeting, provision has not been made for this dividend in these consolidated financial statements.

9.   Related party transaction

The acquisition of Geotek was originated by Charles Holroyd, a Non-Executive Director of Judges. As with all Judges Scientific Non-Executive Directors, and as disclosed in the Group's Annual Report and Accounts, he is incentivised to originate acquisitions on behalf of the Group. Accordingly, at the time of his appointment to the Board of Judges Scientific in 2018, he entered into an introduction agreement entitling him to the payment of a fee amounting to 1% of the enterprise value of any business that he introduced to the Group and was subsequently acquired by the Group ("Introduction Fee"). Based on the experience of the Group, the level of the Introduction Fee is materially lower than the fees charged by independent brokers. 

Mr Holroyd was not involved in any part of the decision-making process in relation to the acquisition. The Introduction Fee in relation to Geotek was payable at the same time and in the same proportion as the payments of the initial consideration and the Earn-out to the sellers. Following settlement of the Earn-out in June 2023, Mr Holroyd elected to receive one half of his fee of £0.4m in new Ordinary shares and the other half in cash to enable him to settle the related tax payable. (2022: £0.4m was paid to Mr Holroyd in respect of the completion of the purchase of Geotek).

10.  Final Results Announcement

This final results announcement, which has been agreed with the auditors, was approved by the Board of Directors on 20 March 2024. It is not the Group's statutory accounts. Copies of the Group's audited statutory accounts for the year ended 31 December 2023 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 52c Borough High Street, London SE1 1XN.

The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention to by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The consolidated financial statements of the Company have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The statutory accounts for the year ended 31 December 2022 have been delivered to the Registrar of Companies, but the 31 December 2023 accounts have not yet been filed.

 

END