TIDMJDG
RNS Number : 1041T
Judges Scientific PLC
23 March 2021
23 March 2021
Judges Scientific plc
("Judges Scientific", "Judges", the "Company" or the
"Group")
FINAL RESULTS
Resilient business model enables sustained execution of strategy
with two acquisitions
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
2020.
The figures reflect a period during which order intake, revenue
and profits were impacted by COVID-19. The Group's priority
throughout this time has been to ensure the health and safety of
its colleagues.
Financial Highlights
-- Revenues down 3.2% to GBP79.9 million (2019: GBP82.5
million), including 12.3% Organic* decline;
-- Despite COVID-19 challenges, the Group generated significant
profits in every month of 2020;
-- Adjusted** operating profit down 17% to GBP14.4 million (2019: GBP17.4 million);
o Statutory operating profit of GBP10.2 million (2019: GBP14.1
million);
-- Adjusted** basic earnings per share down 20% to 177.2p (2019: 222.5p);
o Statutory basic earnings per share of 131.1p (2019:
183.1p);
-- Final dividend of 38.5p, totalling 55.0p for the year, an
increase of 10% (excluding 2019 special dividend); covered 3.2
times by adjusted earnings;
-- Organic* order intake down 13.2% compared with 2019;
-- Organic* order book at 14.0 weeks (31 December 2019: 13.2
weeks); total order book 15.8 weeks;
-- Cash generated from operations of GBP14.6 million (2019: GBP19.1 million);
-- Adjusted** net debt of GBP5.7 million as at 31 December 2020
(31 December 2019: GBP2.0 million);
o Statutory net debt of GBP5.7 million at 31 December 2020 (31
December 2019: GBP0.3 million);
-- Cash balances of GBP15.5 million as at 31 December 2020 (31
December 2019: GBP14.1 million).
Strategic Highlights
-- Heath Scientific acquired on 29 May 2020 for a consideration
of GBP7.3 million plus excess cash;
-- Korvus Technology acquired on 19 October 2020 for a
consideration of GBP2.6 million plus a potential GBP0.4 million
earn-out plus excess cash;
-- Board strengthened with the appointment of Lushani
Kodituwakku as an independent Non-Executive Director.
Outlook
-- Effects of pandemic still being felt but signs are positive, and our sector is adapting;
-- Recovery in order intake still in progress.
* Organic describes the performance of the Group including
businesses acquired prior to 1 January 2019.
** 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 subordinated debt owed
by subsidiaries to non-controlling shareholders.
Alex Hambro, Chairman of Judges Scientific, commented:
"It was unfortunate that the pandemic interrupted the momentum
of our financial progress but I am proud that our businesses took
swift, proactive and bespoke action to optimise their performance
through this difficult year. I would like to thank our colleagues
at every level who worked resolutely to maintain the Group's solid
profitability without sacrificing future opportunities. Your
Group's resilience has enabled it to continue executing its
business model with the completion of two acquisitions and to
recommend an increased final dividend for the year."
For further information please contact:
Judges Scientific plc Tel: 020 3829 6970
David Cicurel, CEO
Brad Ormsby, FD
Shore Capital (Nominated Adviser & Broker) Tel: 020 7408 4090
Stephane Auton
Edward Mansfield
Sarah Mather
Liberum (Joint Broker) Tel: 020 3100 2222
Bidhi Bhoma
Euan Brown
Alma PR (Financial Public Relations) Tel: 020 3405 0205
Sam Modlin
Justine James
Joe Pederzolli
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 19 businesses acquired since it was
re-admitted to AIM in 2005.
The acquired companies are primarily UK-based with products sold
worldwide to a diverse range of markets including: higher education
institutions, the scientific communities, manufacturers and
regulatory authorities. The UK is a recognised centre of excellence
for scientific instruments. The Group companies hold 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 repayment of debt, organic growth
and dividends.
For further information, please visit www.judges.uk.com
CHAIRMAN'S STATEMENT
In 2020 the world's economy was dominated by COVID-19 and
inevitably Judges wasn't immune with order intake, revenue, profits
and cash generation all being impacted. Over the period the Group
prioritised the health and safety of all our colleagues whilst
determined to protect both profitability and financial strength
without sacrificing the initiatives necessary to secure future
progress. All our businesses, under the guidance of our COO and
their management teams, swiftly took measures to mitigate the
impact of the pandemic; illustrating the importance of good
proactive management.
The resilience of the Group's business model enabled the
completion of two acquisitions: Heath Scientific, which trades as
Thermal Hazard Technology ("THT") in May 2020 and Korvus Technology
("Korvus") in October 2020. Despite this past year being the most
challenging in terms of trading it was one of the most productive
in respect of acquisitions.
Delivering attractive returns to our shareholders remains the
core objective of the Group and as such the Board is pleased to be
recommending a final dividend of 38.5p, making a total of 55.0p in
respect of 2020, a 10% increase on the prior year (2019: 50.0p
excluding the 200.0p special dividend). Since the payment of the
first dividend in respect of 2006, regular dividends have grown at
a compound annual rate of 23.1% and total dividend distributions
have aggregated to over 5 times the 2005 re-admission price of
100p.
Strategy
The Group's strategy remains unchanged and is based on creating
shareholder 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 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 are highly selective in
seeking to acquire businesses with a focus on sustainable profits
and cashflows in order 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. As a result of the dependable growth of our Group, it has
been able to promptly reduce debt, generating the financial
resources necessary to reinvest in further acquisitions and reward
shareholders with a progressively increasing dividend, subject
always to our prudent approach on gearing.
The underlying market for scientific instruments 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 and the need for improved
measurement to support the relentless worldwide search for
optimisation across science and industry.
Our team
Our 500-strong team worked extremely hard throughout 2020 to
keep everybody safe, satisfy the needs of our customers and protect
the Group's business. The Board and, I am sure, our shareholders
are grateful to all our colleagues for their efforts in this most
challenging of environments. In solidarity with those who suffered
a reduction in their income as a result of COVID-19, your Directors
reduced their own fixed remuneration by an equal average percentage
and renounced any increase for 2021.
In September 2020, the Board was delighted to welcome Lushani
Kodituwakku as a new independent Non-Executive Director. Lushani is
a distinguished strategy consultant. After several successful years
with prestigious accountancy and consulting practices, she opened
her own consultancy, Luminii Consulting, specialising in commercial
due diligence. We are certain that her strategic vision and
entrepreneurial experience will be of great value to the Group over
the coming years.
Alex Hambro
Chairman
22 March 2021
CHIEF EXECUTIVE'S REPORT
The outbreak of COVID-19 had a radical effect on the business
world. Our Group is fortunate to operate in a sector which does not
depend on perishable goods and services or on impulse purchases but
rather on actual needs and on well thought-out long-term purchasing
decisions; it has however not been immune from the effects of the
pandemic. The main impact on the Group has been on order intake
which fundamentally drives all other Group key performance
metrics.
The pandemic had an impact on the way in which our businesses
operated, to which we responded with the implementation of strict
social distancing measures. As a result, all of our factories have
remained open and pleasingly almost none of our colleagues have
been severely ill. In addition, the supply chain issues that we
faced at the onset of the pandemic were thankfully not serious and
were alleviated by some prudent over-purchasing at an early
stage.
Order intake
Order intake was principally hindered by the restrictions on
travel, by the closure of universities and by capex freezes imposed
by industrial customers. The impossibility of seeing clients and
agents face-to-face and the cancellation of scientific conferences
and trade shows affected all our businesses to varying degrees. Our
sector progressively adapted to the new environment and made
extensive use of digital communications and virtual conferences to
mitigate the impact of travel bans. We expect that some of these
practices will endure after the easing of restrictions.
For the year as a whole, Organic* order intake receded 13%.
Following a brutal reduction in April and some improvement in May,
bookings recovered but did not reach the level achieved in H2 2019.
The poorest performance was recorded in North America (down 26%)
followed by the Rest of the World (down 25%) and China/Hong Kong
(down 22%); Rest of Europe was up 3% and the UK up 8%. The weakest
destinations were the USA, China/Hong Kong and Japan and the
strongest were Belgium, the UK and the Netherlands. As a result of
healthier intake toward the year-end and of more prudent budgeting
for 2021, the Organic order book recovered from 10.8 weeks of
budgeted sales at the time of our Interim Results in June, to 14.0
weeks at the year-end (31 December 2019: 13.2 weeks). Thanks to
strong order activity at the new subsidiaries acquired since 1
January 2019, the Group's total order book ended the year at 15.8
weeks.
* "Organic" in this report describes the performance of the
Group excluding Moorfield, THT and Korvus as they were acquired
since 1 January 2019.
Revenues
We faced a number of challenges in generating revenues from the
order book but thanks to the proactive attitude of all our
operating colleagues, they were largely overcome. Deliveries were
delayed in various territories due to customers being unable to
receive them, but this peaked at the early stages of the pandemic
and the impact on revenue for the year was limited. The most
problematic activity was installations, severely curtailed by the
international travel restrictions; in spite of the Group's effort
to satisfy its clients, a number of installations remained
outstanding at the year-end. The Government's furlough scheme
facilitated the retention of a number of our colleagues whilst they
were unable to work as a result of the Government measures
instituted to fight the pandemic. At the height of the initial
lockdown around 100 staff were furloughed and 250 were working from
home.
Group revenues for the financial year ended 31 December 2020
receded from GBP82.5 million to GBP79.9 million. The Organic*
decline of 12.3% was mitigated by the full year contribution from
Moorfield (acquired in December 2019) and, for part of the year,
from the two acquisitions completed in 2020.
The Group continues to be a strong exporter and is well
diversified across the globe, with 22% of the Group's revenues
earned in North America, 31% in the Rest of Europe and 17% in
China/Hong Kong. Contrary to what might have been expected early in
the year, Organic revenues grew strongly in China/Hong Kong (up
18%) but all the other trading zones declined with North America
down 32%, the Rest of the World down 18% the UK down 6% and the
Rest of Europe down 3%. The most notable swings were the USA (down
GBP7.5 million) and China/Hong Kong (up GBP1.7 million); the UK,
Japan and Germany reduced by GBP0.5 million each whilst France and
the Netherlands progressed by GBP0.5 million each.
Profits
The most important driver of Judges' operating margins is
volume. The impact of the sudden deceleration of revenues was
mitigated by swift action to defer budgeted spending where
possible, without jeopardising future new product introductions, by
cost reductions, by spontaneous savings on international travel and
conferences, and by some compression of the order book.
Profit before tax and adjusting items receded 19% to GBP13.7
million (2019: GBP17.0 million). Organic operating contribution was
down 20%; a majority of the Group businesses reduced their
contribution but four managed to beat their all-time record
profits, all achieved in 2019 . The operating subsidiaries combined
produced a Return on Total Invested Capital of 23.5% (2019: 31.4%).
In spite of the COVID-19 challenges, the Group generated
significant profits every single month of 2020.
Despite the efforts to preserve profitability, the Group
increased its investment in the improvement of its existing
products and the development of new products. Investment in
research and development amounted to GBP6.2 million in 2020 (2019:
GBP5.2 million), equivalent to 7.7% of Group revenue (2019:
6.4%).
The setback in pre-tax profits was replicated in earnings per
share: Adjusted earnings per share receded by 20% to 177.2p from
222.5p; adjusted fully diluted earnings per share also declined 20%
to 173.9p (2019: 218.4p).
Acquisitions
As a buy and build focused group, the acquisition of new
businesses is a fundamental feature of Group strategy. Executing
this effectively is key to ensure that long-term value is generated
for shareholders. We retain a strict acquisition discipline and are
highly selective in relation to both the acquisition cost 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.
On 29 May 2020, the Group acquired 100% of the share capital of
THT for a total cash consideration of GBP7.3 million, including a
GBP2.0 million earn-out but excluding excess cash. In the year
ended 30 April 2020, THT generated GBP1.2 million adjusted EBIT.
THT makes instruments to measure the heat release of chemical
reactions; it is involved in the fast-growing area of Lithium-ion
batteries.
On 19 October 2020, the Group acquired 100% of the share capital
of Korvus for a cash consideration of GBP2.6 million plus excess
cash. In the year ended 31 March 2020, Korvus generated GBP0.7
million EBIT; an earn-out capped at GBP0.4 million will be payable
if and to the extent the adjusted EBIT for the current year exceeds
this amount. Korvus makes instruments to deposit thin films on
surfaces.
During the year, Judges purchased the remaining shares in
PE.fiberoptics ("PFO"); the GBP1.1 million purchase price was
covered by the amount of excess cash within PFO, which is now
available to the Group. Post year-end, the Group purchased another
12.5% of Bordeaux Acquisition (the holding company for Deben UK and
Oxford Cryosystems) for GBP1.8 million, bringing our ownership to
88%.
Cashflow
In spite of the build-up earlier in the year of precautionary
stock and finished products awaiting delivery, and of receivables
relating to outstanding installations, cash conversion was
satisfactory at 102% (2019: 110%), with cash generated from
operations of GBP14.6 million (2019: GBP19.1 million). As a result,
year-end cash balances increased to GBP15.5 million from GBP14.1
million as at 31 December 2019, notwithstanding expenditure of
GBP11.0 million on 2020's acquisitions. Adjusted net debt
(excluding subordinated debt owed to non-controlling shareholders
but including sums still due in respect of acquisitions) at the
year-end amounted to GBP5.7 million (2019: GBP2.0 million).
Dividends
Your Board is recommending a final dividend of 38.5p per share
subject to approval at the forthcoming Annual General Meeting on 26
May 2021, which will make a total distribution of 55.0p per share
in respect of 2020 (2019: 50.0p per share, excluding the special
dividend). Despite the impact of the pandemic on financial
performance in 2020, the total dividend per share is 3.2 times
covered by adjusted earnings per share (2019: 4.5 times). Our
policy of increasing the dividend by a minimum of 10% per year is
only sustainable because there is ample cover.
The proposed final dividend, if approved by shareholders, will
be payable on 9 July 2021 to shareholders on the register on 11
June 2021 and the shares will go ex-dividend on 10 June 2021.
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 remain positive. Market demand is being driven
primarily by the strong worldwide growth in higher education and
the enduring pursuit of optimisation across science and industry;
optimisation requires measurement.
Despite these positive long-term trends, the markets across
which Judges and its peers operate are characterised by a degree of
shorter-term variability, influenced mostly by government spending,
currency fluctuations and the business climate in major trading
blocs, particularly the USA and China. In smaller territories,
year-on-year comparisons are not necessarily illustrative of
performance, partly due to the high value of some individual orders
and the long gestation period often occurring before purchasing
intentions crystallise into orders and sales.
In the medium-term horizon the competing goals, in the various
jurisdictions where the Group operates, of stimulating recovery and
of reducing exploding government deficits will increase uncertainty
in worldwide research funding.
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 its revenue originates from countries where
the standard of value is the Euro (one quarter of total revenue) or
the US Dollar (two thirds of total revenue). The currency movements
in the run-up to the Brexit vote and since have had a positive
influence (mitigated to an extent by hedging) on our margins and
our competitiveness; the recent resolution of the Brexit
uncertainty has improved the outlook for Sterling but exchange
rates remain favourable to our Group.
Outlook
One might have hoped that the comments about COVID-19 were made
in the past tense. Sadly, they are not but there are reasons to be
positive as worldwide weekly cases halved in the six weeks leading
to 20 February 2021 despite regional spikes, even before the
acceleration of global vaccinations over the past month.
Our Group has shown its resilience in the face of the pandemic;
our sector has been relatively protected and our market has adapted
well. As we look ahead, we are starting 2021 with a good order book
and a strong financial position although the recovery is still
tentative with Organic order intake for the first 10 weeks of the
year slightly ahead of the same period last year. Whilst
uncertainty around COVID-19 remains, the medium to long-term
outlook for the Group remains positive.
David Cicurel
Chief Executive
22 March 2021
FINANCE DIRECTOR'S REPORT
The Group's strategy is based on the acquisition of companies
operating in the scientific instruments sector and the continuing
generation of profitable performance at its existing subsidiary
businesses.
The Group's Key Performance Indicators, which are aligned with
the ability to reduce acquisition debt and fund dividend payments
to shareholders, are earnings per share, operating margins, return
on invested capital and cash conversion. All four KPIs have
unsurprisingly fallen back in 2020 as a result of the impact that
COVID-19 has had on performance although this has not stopped the
Group from delivering on its acquisition strategy and producing a
strongly profitable performance, albeit well below our previous
high watermarks.
Revenue
Group revenues decreased by 3.2% to GBP79.9 million compared
with GBP82.5 million in the prior year. Organic revenues declined
by 12.3% (2019: Organic growth of 5.6%) due to COVID-19's impact on
order intake and were partially offset by the full year
contribution from Moorfield and also from THT and Korvus, the
businesses that we acquired in May 2020 and October 2020,
respectively.
Across our two segments, Materials Sciences total revenues
reduced by GBP1.6 million to GBP33.2 million (2019: GBP34.8
million) whilst Vacuum revenues declined by GBP1.0 million to
GBP46.7 million (2019: GBP47.7 million).
Profits
The effect of COVID-19 on revenues flowed through into
profitability. Adjusted operating profits reduced by 17.4% to
GBP14.4 million from GBP17.4 million in 2019 and operating margins
declined to 18.0% (2019: 21.1%). Due to the Group's high
operational gearing, any reduction in revenue significantly affects
profitability, but due to the actions taken by our businesses in
controlling costs (particularly around travel and sales and
marketing) we were able to partially mitigate this impact on
overall performance. The Group also accepted furlough monies from
the UK Government on behalf of those employees unable to work due
to the lockdown. These were mainly as a result of reduced
production due to social distancing but also affected those whose
roles required them to travel such as installation and service
engineers. Sterling remained weak through 2020 which continued to
benefit the Group, although since the start of 2021 and following
the completion of a Brexit deal, Sterling has started to
strengthen. Adjusted profit before tax was GBP13.7 million compared
to GBP17.0 million in 2019, a decrease of 19.1%.
Statutory operating profit decreased to GBP10.2 million (2019:
GBP14.1 million), and statutory profit before tax was GBP9.5
million compared to GBP13.6 million in 2019.
Adjusting items
The total pre-tax adjusting items of GBP4.2 million were
recorded in 2020 (2019: GBP3.3 million). The main constituents were
amortisation of intangible assets recognised upon acquisition of
GBP3.2 million (2019: GBP2.7 million) with the increase arising
from the recent acquisitions of Moorfield in December 2019 and THT
and Korvus in 2020, and GBP0.6 million of acquisition costs
relating to the two 2020 acquisitions (2019: GBP0.3 million).
Finance costs
Net finance costs (excluding adjusting items) totalled GBP0.6
million (2019: GBP0.4 million). Interest income decreased by GBP0.1
million as we carried far higher cash balances in 2019 and with
higher interest rates. A further GBP0.1 million related to greater
interest charges arising from the additional borrowing required to
finance the two acquisitions made during 2020. Statutory net
finance costs were GBP0.7 million (2019: GBP0.5 million), the
GBP0.1 million difference between the statutory and adjusted
figures is attributable to the net finance cost arising from the
defined benefit pension scheme acquired with Armfield in 2015.
Taxation
The Group's tax charge arising from adjusted profit before tax
was GBP2.0 million (2019: GBP2.5 million). The effective tax rate
on adjusted profits is 14.8% compared with 14.7% in the prior year.
The effective tax rate is influenced by the wider regime of low UK
and US corporate tax rates and by claims for UK research and
development tax credits. The Group benefits from a tax rate lower
than the standard UK corporation rate as we continue to invest
heavily in R&D and as we have remained an SME for R&D tax
credits. Whilst the Group had less than 500 full-time equivalent
employees during 2020 it is likely that we will exceed this amount
in 2021 and, over time, move into the large companies R&D
scheme which is less generous.
Earnings per share
Adjusted basic earnings per share reduced by 20.4% to 177.2p
from 222.5p and adjusted diluted earnings per share was 20.4% lower
at 173.9p (2019: 218.4p).
Statutory basic earnings per share, after reflecting adjusting
items which are influenced by the amortisation of intangible assets
arising from recent acquisitions, was 131.1p (2019: 183.1p) and
statutory diluted earnings per share totalled 128.7p (2019:
179.8p).
Order intake
The Group suffered as a consequence of the pandemic with an
overall decline of 13.2% in Organic order intake. Order intake
dropped steeply during the early stages of the various national
lockdowns but recovered somewhat in the second half of the year.
This meant that we were able to rebuild a good proportion of the
orders that had been used up in the first half of the year and
meant that we held a substantial order book at the start of 2021.
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 whilst the impact of the lower order
intake was evident in our trading performance in 2020, the Organic
order book at 31 December 2020 was 14.0 weeks of budgeted sales (31
December 2019: 13.2 weeks) although in quantum the order book was
GBP1.7 million lower than at the prior year end. Total order book
was 15.8 weeks, including Moorfield, THT and Korvus.
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 2020 reflected the weaker
performance in 2020 and receded to 23.5% compared with 31.4% in
2019. We expect to improve this as those businesses in our Group
whose performance was affected by the pandemic seek to return to
their previous levels of performance.
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).
ROTIC is influenced by the overall performance of our businesses
and the size of, and multiple paid for, acquisitions. We continue
to aim for improved ROTIC whilst accepting the downward pressure on
overall returns from acquiring businesses at higher multiples.
Dividends
In relation to the financial year ended 31 December 2020 the
Company paid an interim dividend of 16.5p per share in November
2020. The Board is recommending a final dividend of 38.5p per share
giving a total dividend for the year of 55.0p per share (2019:
50.0p per share), an increase of 10%. Dividend cover is
approximately three and a quarter times earnings per share. No
special dividends were paid in 2020 (2019: 200.0p per share).
Your Group's policy is to pay a progressively increasing
dividend covered by earnings provided the Group retains sufficient
cash and borrowing resources with which to pursue its longstanding
acquisition policies.
Headcount
The Group's full time equivalent (FTE) employees for 2020 stood
at 499 (2019: 466). We expect that FTEs will exceed 500 in 2021,
particularly following the acquisitions of THT in May 2020 and
Korvus in October 2020.
Share capital and share options
The Group's issued share capital at 31 December 2020 totalled
6,299,163 Ordinary shares (2019: 6,226,291). The shares issued
during 2020 arose from the exercise of share options by various
members of staff during the year.
Share options issued during the year under the 2015 scheme
totalled 6,151 (2019: 13,905) and the total share options in issue
at the year-end under both the 2005 and 2015 schemes amounted to
160,026 (2019: 228,300).
Defined benefit pension scheme
The Group has a defined benefit pension scheme which was assumed
as part of the acquisition of Armfield in 2015. This scheme has
been closed to new members from 2001 and closed to new accrual in
2006. A new triennial full actuarial valuation was performed in
2020 and following this valuation, the annual contributions to the
scheme have been increased to GBP0.4 million as a result of
increases to the pension scheme deficit. The Group accounts for
post-retirement benefits in accordance with IAS 19 Employment
Benefits. The Consolidated balance sheet reflects the net 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 2020, the pension liability
(net of deferred tax) was GBP2.7 million (31 December 2019: GBP1.7
million). The net liability has increased due to a sizeable
reduction in discount rates during 2020 from 2.1% to 1.4%,
lengthening in mortality rates and also increases in inflation.
These increases in the pension liability were only slightly offset
by growth in the fund's assets. Armfield takes its responsibility
seriously to ensure the pension is adequately funded whilst also
continuing to review appropriate deficit control strategies.
Cashflow and net debt
Whilst we have had a challenging year's trading, the Group
continued to deliver strong cash generation with cash generated
from operations of GBP14.6 million (2019: GBP19.1 million). The
Group's excellent track record of converting profit into cash is
reflected in the high conversion rate of adjusted operating profit
into cash of 102% (2019: 110%) even if this figure was mildly
impacted by an increase in receivables, where at year-end we were
holding GBP1.8 million more short-term overdue receivables (less
than six months overdue) largely due to the Group's inability to
travel to, and complete, installations and training across the
globe and consequently be paid upon completion. Total capital
expenditure on property, plant and equipment amounted to GBP1.3
million (2019: GBP1.3 million). The figure is inflated due to
GBP0.3 million spent on purchasing Moorfield's property at the
start of 2020 and otherwise reflects the prudence throughout the
year in avoiding non-essential capital expenditure to preserve
cash. Year-end cash balances totalled GBP15.5 million compared to
GBP14.1 million in 2019.
The Group finished 2020 with adjusted net debt of GBP5.7 million
compared to GBP2.0 million of adjusted net debt at the end of 2019.
Statutory net debt was GBP5.7 million (2019: statutory net debt of
GBP0.3 million).
The small increase in our net debt is as a result of continuing
to deliver on our strategy with capital allocated to acquiring THT
in May 2020 for GBP7.3 million, Korvus in October 2020 for GBP2.6
million, together with GBP1.1 million spent in making
PE.fiberoptics a wholly-owned subsidiary of Judges. This
significant investment in the future of our Group was more than
covered by the cash generated in 2020 thanks to the efforts by all
our team to deliver good profitability in a very tough year and
also convert that into cash. We were therefore able to continue our
policy of paying progressively increasing dividends to shareholders
(GBP3.2 million in 2020) and finished 2020 still in a conservative
position. Gearing, calculated as the proportion of adjusted net
debt compared to adjusted operating profit, at 31 December 2020 was
0.40 times (2019: 0.12 times) and we remain committed to
maintaining a conservative gearing position whilst at the same time
taking the opportunities of acquiring strong, sound businesses at
disciplined multiples as illustrated both this year and across the
history of our Group.
The Group's financial position continues to be a strength and we
have suitable banking facilities to support inorganic growth. Our
Group bank f acility with Lloyds Banking Group (the "Bank") is for
an aggregate GBP35.0 million consisting of a GBP10.0 million term
loan ("Term Loan"), a committed GBP20.0 million revolving credit
facility ("RCF") plus a GBP5.0 million accordion facility, which
can be drawn at the discretion of the Bank; the facility expires in
April 2023 ("the Borrowing Term"). The Term Loan amortises on a
straight-line basis via quarterly payments and the RCF is repayable
in a bullet at the end of the Borrowing Term. In November 2020 the
accordion facility was activated and consequently this increased
the committed RCF to GBP25.0 million.
During the year, the Bank agreed to repurpose GBP5.0 million of
the RCF as a working capital buffer which the Group drew down in
the first half of the year. This was repaid in December 2020 as we
had sufficient cash reserves for the foreseeable future.
The existing lending facilities via Bordeaux Acquisition
("Bordeaux"), the Group's majority owned subsidiary, which owns
Deben UK and Oxford Cryosystems, remain unchanged.
At the year-end the Term Loan had reduced to GBP4.5 million
(2019: GBP6.5 million) and the RCF was drawn down to GBP15.0
million (2019: GBP5.2 million), with GBP10.0 million available to
drawdown for future acquisitions. At 31 December 2020, the Bordeaux
loan had also reduced to GBP1.7 million (2019: GBP2.6 million).
The ongoing long-term support of the Bank continues to provide
the Group with significant capacity to finance acquisitions in
support of the Group's buy and build strategy.
Overall, and despite the challenges that the pandemic has
caused, the Group has delivered a good performance given the
circumstances and it remains well placed, with a strong balance
sheet and significant available borrowing capacity, to continue its
strategy of achieving growth in earnings via selective acquisitions
of strong niche businesses in the scientific instruments sector,
alongside the ongoing performance of its existing businesses.
Brad Ormsby
Group Finance Director
22 March 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Note Adjusting
Adjusted items Total Adjusted Adjusting items Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 2 79,865 - 79,865 82,499 - 82,499
Operating costs 2 (65,508) (4,191) (69,699) (65,115) (3,274) (68,389)
Operating profit/(loss) 14,357 (4,191) 10,166 17,384 (3,274) 14,110
Interest income 14 - 14 101 - 101
Interest expense (654) (53) (707) (532) (48) (580)
Profit/(loss) before
tax 13,717 (4,244) 9,473 16,953 (3,322) 13,631
Taxation (charge)/credit (2,029) 1,204 (825) (2,484) 707 (1,777)
Profit/(loss) for the
year 11,688 (3,040) 8,648 14,469 (2,615) 11,854
============ ============ ======== ======== =============== ========
Attributable to:
Owners of the parent 11,108 (2,888) 8,220 13,828 (2,446) 11,382
Non-controlling interests 580 (152) 428 641 (169) 472
Profit/(loss) for the
year 11,688 (3,040) 8,648 14,469 (2,615) 11,854
------------ ------------ -------- -------- --------------- --------
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Retirement benefits actuarial loss (1,092) (375)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign subsidiaries (82) (62)
-------- --------
Other comprehensive income for the year, net of tax (1,174) (437)
-------- --------
Total comprehensive income for the year 7,474 11,417
======== ========
Attributable to:
Owners of the parent 7,046 10,945
Non-controlling interests 428 472
======== ========
Earnings per share - adjusted Pence Pence
Basic 1177.2 222.5
Diluted 1173.9 218.4
===== =====
Earnings per share - total
Basic 1131.1 183.1
Diluted 1128.7 179.8
===== =====
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2020
2020 2019
GBP000 GBP000
-------------------------------------------------- -------- --------
ASSETS
Non-current assets
Goodwill 18,713 15,265
Other intangible assets 6,909 4,458
Property, plant and equipment 6,678 6,107
Right-of-use leased assets 5,125 4,428
Deferred tax assets 2,153 1,873
--------------------------------------------------- -------- --------
39,578 32,131
-------------------------------------------------- -------- --------
Current assets
Inventories 12,585 12,543
Trade and other receivables 14,340 11,814
Cash and cash equivalents 15,523 14,123
--------------------------------------------------- -------- --------
42,448 38,480
-------------------------------------------------- -------- --------
Total assets 82,026 70,611
--------------------------------------------------- -------- --------
LIABILITIES
Current liabilities
Trade and other payables (15,828) (15,322)
Trade and other payables relating to acquisitions - (1,896)
Borrowings (3,857) (3,051)
Right-of-use lease liabilities (947) (757)
Current tax liabilities (1,539) (2,258)
--------------------------------------------------- -------- --------
(22,171) (23,284)
-------------------------------------------------- -------- --------
Non-current liabilities
Borrowings (17,358) (11,399)
Right-of-use lease liabilities (4,209) (3,689)
Deferred tax liabilities (1,945) (1,447)
Retirement benefit obligations (3,295) (2,100)
--------------------------------------------------- -------- --------
(26,807) (18,635)
-------------------------------------------------- -------- --------
Total liabilities (48,978) (41,919)
--------------------------------------------------- -------- --------
Net assets 33,048 28,692
--------------------------------------------------- -------- --------
EQUITY
Share capital 315 311
Share premium account 16,429 15,453
Other reserves 1,977 2,059
Retained earnings 13,469 10,048
--------------------------------------------------- -------- --------
Equity attributable to owners of the parent
company 32,190 27,871
--------------------------------------------------- -------- --------
Non-controlling interests 858 821
--------------------------------------------------- -------- --------
Total equity 33,048 28,692
--------------------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
Total
attributable
to owners
Share Share Other Retained of Non-controlling Total
capital premium reserves earnings the parent interests equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
At 1 January 2020 311 15,453 2,059 10,048 27,871 821 28,692
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Dividends - - - (3,231) (3,231) - (3,231)
Adjustment arising
from change
in non-controlling
interest - - - (680) (680) (391) (1,071)
Issue of share capital 4 976 - - 980 - 980
Deferred tax on share-based
payments - - - (113) (113) - (113)
Share-based payments - - - 317 317 - 317
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Transactions with owners 4 976 - (3,707) (2,727) (391) (3,118)
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Profit for the year - - - 8,220 8,220 428 8,648
Retirement benefit
actuarial loss - - - (1,092) (1,092) - (1,092)
Foreign exchange differences - - (82) - (82) - (82)
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Total comprehensive
income for the year - - (82) 7,128 7,046 428 7,474
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
At 31 December 2020 315 16,429 1,977 13,469 32,190 858 33,048
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
At 1 January 2019 310 15,164 2,121 13,049 30,644 562 31,206
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Dividends - - - (15,126) (15,126) - (15,126)
Adjustment arising
from change
in non-controlling
interest - - - (204) (204) (213) (417)
Issue of share capital 1 289 - - 290 - 290
Deferred tax on share-based
payments - - - 1,027 1,027 - 1,027
Share-based payments - - - 295 295 - 295
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Transactions with owners 1 289 - (14,008) (13,718) (213) (13,931)
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Profit for the year - - - 11,382 11,382 472 11,854
Retirement benefit
actuarial loss - - - (375) (375) - (375)
Foreign exchange differences - - (62) - (62) - (62)
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
Total comprehensive
income for the year - - (62) 11,007 10,945 472 11,417
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
At 31 December 2019 311 15,453 2,059 10,048 27,871 821 28,692
----------------------------- -------- -------- --------- --------- ------------- --------------- --------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2020
2020 2019
GBP000 GBP000
---------------------------------------------------------- -------- --------
Cashflows from operating activities
Profit after tax 8,648 11,854
Adjustments for:
Financial instruments measured at fair value:
Hedging contracts 72 (37)
Share-based payments 317 295
Depreciation of property, plant and equipment 926 771
Depreciation of right-of-use leased assets 935 863
Amortisation of intangible assets 3,179 2,739
Loss on disposal of property, plant and equipment (4) 1
Charge on exit from right-of-use leases - 39
Interest income (14) (101)
Interest expense 464 397
Interest payable on right-of-use lease liabilities 190 135
Retirement benefit obligation net finance cost 53 48
Contributions to defined benefit plans (236) (236)
Tax expense recognised in Consolidated Statement of
Comprehensive Income 825 1,777
Decrease/(increase) in inventories 1,099 (1,794)
(Increase)/decrease in trade and other receivables (1,232) 1,566
(Decrease)/increase in trade and other payables (598) 763
---------------------------------------------------------- -------- --------
Cash generated from operations 14,624 19,080
Tax paid (2,377) (2,205)
---------------------------------------------------------- -------- --------
Net cash from operating activities 12,247 16,875
---------------------------------------------------------- -------- --------
Cashflows from investing activities
---------------------------------------------------------- -------- --------
Paid on acquisition of subsidiaries (8,857) (2,288)
Payment of deferred consideration (3,922) -
Gross cash inherited on acquisition 1,363 2,201
---------------------------------------------------------- -------- --------
Acquisition of subsidiaries, net of cash acquired (11,416) (87)
Purchase of property, plant and equipment (1,268) (1,303)
Proceeds on disposal of property, plant and equipment 14 22
Interest received 14 101
---------------------------------------------------------- -------- --------
Net cash used in investing activities (12,656) (1,267)
---------------------------------------------------------- -------- --------
Cashflows from financing activities
Proceeds from issue of share capital 980 290
Finance costs paid (468) (393)
Repayments of borrowings* (7,857) (2,868)
Repayment of subordinated loan notes (190) -
Repayments of right-of-use lease liabilities (1,108) (926)
Proceeds from bank loans* 14,816 2,288
Equity dividends paid (3,231) (15,126)
Share repurchase - non-controlling interest in subsidiary (1,071) (417)
---------------------------------------------------------- -------- --------
Net cash used in financing activities 1,871 (17,152)
---------------------------------------------------------- -------- --------
Net change in cash and cash equivalents 1,462 (1,544)
Cash and cash equivalents at the start of the year 14,123 15,727
Exchange movements (62) (60)
---------------------------------------------------------- -------- --------
Cash and cash equivalents at the end of the year 15,523 14,123
---------------------------------------------------------- -------- --------
*Includes GBP5,000,000 borrowed as working capital buffer and
subsequently repaid in 2020
NOTES TO THE FINAL RESULTS ANNOUNCEMENT
FOR THE YEARED 31 DECEMBER 2020
1. Earnings per share
2020 2019
Note GBP000 GBP000
-------------------------------------------- ---- ------- -------
Profit attributable to owners of the parent
Adjusted profit 11,108 13,828
Adjusting items 3 (2,888) (2,446)
-------------------------------------------- ---- ------- -------
Profit for the year 8,220 11,382
-------------------------------------------- ---- ------- -------
Pence Pence
------------------------------ ----- -----
Earnings per share - adjusted
Basic 177.2 222.5
Diluted 173.9 218.4
Earnings per share - total
Basic 131.1 183.1
Diluted 128.7 179.8
------------------------------- ----- -----
Number Number
------------------------------------------------ --------- ---------
Issued Ordinary shares at the start of the year 6,226,291 6,196,678
Movement in Ordinary shares during the year 72,872 29,613
------------------------------------------------- --------- ---------
Issued Ordinary shares at the end of the year 6,299,163 6,226,291
------------------------------------------------- --------- ---------
Weighted average number of shares in issue 6,269,437 6,215,817
Dilutive effect of share options 117,551 115,517
------------------------------------------------- --------- ---------
Weighted average shares in issue on a diluted
basis 6,386,988 6,331,334
------------------------------------------------- --------- ---------
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
Materials Unallocated
For the year ended 31 December Sciences Vacuum items Total
2020 Note GBP000 GBP000 GBP000 GBP000
------------------------------- ---- --------- -------- ----------- --------
Revenue 33,210 46,655 - 79,865
Operating costs (28,341) (34,564) (2,603) (65,508)
------------------------------- ---- --------- -------- ----------- --------
Adjusted operating profit 4,869 12,091 (2,603) 14,357
Adjusting items 3 (4,191)
------------------------------- ---- --------- -------- ----------- --------
Operating profit 10,166
Net interest expense (693)
------------------------------- ---- --------- -------- ----------- --------
Profit before tax 9,473
Income tax charge (825)
Profit for the year 8,648
------------------------------- ---- --------- -------- ----------- --------
Materials Unallocated
For the year ended 31 December Sciences Vacuum items Total
2019 Note GBP000 GBP000 GBP000 GBP000
------------------------------- ---- --------- -------- ----------- --------
Revenue 34,819 47,680 - 82,499
Operating costs (27,169) (35,569) (2,377) (65,115)
------------------------------- ---- --------- -------- ----------- --------
Adjusted operating profit 7,650 12,111 (2,377) 17,384
Adjusting items 3 (3,274)
------------------------------- ---- --------- -------- ----------- --------
Operating profit 14,110
Net interest expense (479)
------------------------------- ---- --------- -------- ----------- --------
Profit before tax 13,631
Income tax charge (1,777)
Profit for the year 11,854
------------------------------- ---- --------- -------- ----------- --------
Unallocated items relate to the Group's head office costs.
Segment assets and liabilities
Materials Unallocated
Sciences Vacuum items Total
At 31 December 2020 GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- -------- ----------- --------
Assets 23,566 31,713 26,747 82,026
Liabilities (11,468) (11,702) (25,808) (48,978)
------------------------------------ --------- -------- ----------- --------
Net assets 12,098 20,011 939 33,048
------------------------------------ --------- -------- ----------- --------
Capital expenditure 355 902 11 1,268
Depreciation of property, plant and
equipment 285 591 50 926
Depreciation of right-of-use leased
assets 465 413 57 935
Amortisation 1,345 1,834 - 3,179
------------------------------------ --------- -------- ----------- --------
Materials Unallocated
Sciences Vacuum items Total
At 31 December 2019 GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- -------- ----------- --------
Assets 20,392 30,351 19,868 70,611
Liabilities (10,357) (17,027) (14,535) (41,919)
------------------------------------ --------- -------- ----------- --------
Net assets 10,035 13,324 5,333 28,692
------------------------------------ --------- -------- ----------- --------
Capital expenditure 411 836 56 1,303
Depreciation of property, plant and
equipment 189 552 30 771
Depreciation of right-of-use leased
assets 410 399 54 863
Amortisation 1,209 1,530 - 2,739
------------------------------------ --------- -------- ----------- --------
Unallocated items are borrowings, intangible assets and goodwill
arising on acquisition, deferred tax, defined benefit obligations
and parent company net assets.
Analysis by geographical areas
Non-current Non-current
Revenue Revenue assets assets
-------------------- ------------ ------------ ------------ ------------
Year to Year to As at As at
31 December 31 December 31 December 31 December
2020 2019 2020 2019
Geographic analysis GBP000 GBP000 GBP000 GBP000
-------------------- ------------ ------------ ------------ ------------
UK (domicile) 10,167 9,690 39,288 32,067
Rest of Europe 24,784 23,418 - -
North America 17,289 24,459 290 64
China/Hong Kong 13,721 9,487 - -
Rest of the World 13,904 15,445 - -
-------------------- ------------ ------------ ------------ ------------
79,865 82,499 39,578 32,131
-------------------- ------------ ------------ ------------ ------------
Segmental revenue is presented on the basis of the destination
of the goods where known, otherwise the geographical location of
customers is utilised.
No customer makes up more than 10% of the Group's revenues.
3. Adjusting items
2020 2019
GBP000 GBP000
------------------------------------------------------ ------- -------
Amortisation of intangible assets 3,179 2,739
Financial instruments measured at fair value: hedging
contracts 72 (37)
Share-based payments 317 295
Employment taxes arising from share-based payments 64 -
Acquisition costs 559 277
Total adjusting items in operating profit 4,191 3,274
Retirement benefits obligation net interest cost 53 48
------------------------------------------------------ ------- -------
Total adjusting items 4,244 3,322
Taxation (1,204) (707)
------------------------------------------------------ ------- -------
Total adjusting items net of tax 3,040 2,615
------------------------------------------------------ ------- -------
Attributable to:
Owners of the parent 2,888 2,446
Non-controlling interest 152 169
------------------------------------------------------ ------- -------
3,040 2,615
------------------------------------------------------ ------- -------
4. Borrowings and net debt
Borrowings mature as follows:
Subordinated
Bank loans loan Total
31 December 2020 GBP000 GBP000 GBP000
---------------------------------------- ---------- ------------ --------
Repayable in less than six months 2,115 - 2,115
Repayable in months seven to twelve 2,100 - 2,100
---------------------------------------- ---------- ------------ --------
Current portion of long-term borrowings 4,215 - 4,215
Repayable in years one to five 17,704 - 17,704
---------------------------------------- ---------- ------------ --------
Total borrowings 21,919 - 21,919
Less: interest included above (704) - (704)
Less: cash and cash equivalents (15,523) - (15,523)
---------------------------------------- ---------- ------------ --------
Total net debt 5,692 - 5,692
---------------------------------------- ---------- ------------ --------
Subordinated
Bank loans loan Total
31 December 2019 GBP000 GBP000 GBP000
-------------------------------------------------- ---------- ------------ --------
Repayable in less than six months 1,614 190 1,804
Repayable in months seven to twelve 1,593 - 1,593
-------------------------------------------------- ---------- ------------ --------
Current portion of long-term borrowings 3,207 190 3,397
Repayable in years one to five 11,896 - 11,896
-------------------------------------------------- ---------- ------------ --------
Total borrowings 15,103 190 15,293
Less: interest included above (843) - (843)
Less: cash and cash equivalents (14,123) - (14,123)
-------------------------------------------------- ---------- ------------ --------
Total net debt 137 190 327
-------------------------------------------------- ---------- ------------ --------
Adjusting items
Subordinated debt to non-controlling shareholders (190)
Accrued deferred consideration 1,896
-------------------------------------------------- ---------- ------------ --------
Adjusted net debt 2,033
-------------------------------------------------- ---------- ------------ --------
5. Acquisitions
Acquisition of Heath Scientific Company Limited
On 29 May 2020 the Company acquired 100% of the issued share
capital of Heath Scientific Company Limited, together with its
wholly owned subsidiaries Thermal Hazard Technology Limited and THT
Inc. ("THT"). THT is based in Bletchley, Buckinghamshire and
specialises in the design and manufacture of scientific instruments
focusing on calorimeters that are principally used to quantify
thermal properties of lithium batteries as well as other reactive
chemicals and materials .
The initial purchase price of THT, paid in cash at completion,
amounted to GBP5.3 million. Additionally, an earn-out was payable
based on THT's adjusted EBIT in the year to 30 April 2020, capped
at GBP2.0 million, together with an amount to reflect any excess
cash and working capital over and above the ongoing requirements of
the business. The earn-out was achieved in full and the excess cash
was covered by cash inherited at the completion date. Both amounts
were paid in August 2020.
The summary provisional fair value of the cost of this
acquisition includes the components stated below:
Consideration GBP000
------------------------------------------------------------------ ------
Initial cash consideration 5,274
Earn-out 2,026
------------------------------------------------------------------ ------
7,300
------------------------------------------------------------------ ------
Gross cash inherited on acquisition 969
Cash retained in the business (226)
------------------------------------------------------------------ ------
Payment in respect of surplus working capital 743
------------------------------------------------------------------ ------
Total consideration 8,043
------------------------------------------------------------------ ------
Acquisition-related transaction costs charged to the Consolidated
Statement of Comprehensive Income 384
------------------------------------------------------------------ ------
The acquisition of THT was financed via drawdown from the
Group's GBP35.0 million acquisition facility from Lloyds Bank
Corporate Markets.
The summary provisional fair values recognised for the assets
and liabilities acquired are as follows:
Accounting
policy Fair value Fair
Book value alignments adjustments value
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ---------- ----------- ------------ -------
Intangible assets - - 4,250 4,250
Property, plant and equipment 263 (39) - 224
Right-of-use leased assets - 267 - 267
Deferred tax assets - - 77 77
Inventories 992 - (62) 930
Trade and other receivables 1,126 - (232) 894
Cash and cash equivalents 969 - - 969
---------------------------------------- ---------- ----------- ------------ -------
Total assets 3,350 228 4,033 7,611
---------------------------------------- ---------- ----------- ------------ -------
Deferred tax liabilities (27) - (808) (835)
Trade payables (788) - (111) (899)
Right-of-use lease liabilities - (267) - (267)
Current tax liability (99) - - (99)
---------------------------------------- ---------- ----------- ------------ -------
Total liabilities (914) (267) (919) (2,100)
---------------------------------------- ---------- ----------- ------------ -------
Net identifiable assets and liabilities 2,436 (39) 3,114 5,511
---------------------------------------- ---------- ----------- ------------ -------
Total consideration 8,043
---------------------------------------- ---------- ----------- ------------ -------
Goodwill recognised 2,532
---------------------------------------- ---------- ----------- ------------ -------
The intangible assets recognised reflect recognition of acquired
customer relationships, the value of the acquired future committed
order book, acquired technology together with brand and domain
names. 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. This goodwill has been
allocated to the Materials Sciences segment.
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 and the fair value of the assets. Additional fair value
adjustments include stock, doubtful debt, commission and warranty
provisions together with any related deferred tax. Adjustments to
property, plant and equipment and right-of-use assets and
liabilities were made to align with Group accounting policies.
This acquisition resulted in a profit after tax (before
adjusting items) attributable to owners of the parent company of
GBP400,000 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 GBP395,000 after tax.
If the acquisition had completed on 1 January 2020, based on
pro-forma results, revenue for the Group for the year ended 31
December 2020 would have increased by a further GBP2,100,000 and
profit after tax (before adjusting items) attributable to the
owners of the parent company would have increased by a further
GBP360,000 after allowing for interest costs. Amortisation of
intangible assets on a pro-forma basis from 1 January 2020 to the
date of acquisition would have been GBP645,000.
Acquisition of Korvus Technology Limited
On 19 October 2020 the Company acquired 100% of the issued share
capital of Korvus Technology Limited ("Korvus"). Korvus is based in
Tavistock, Devon, and specialises in the design and manufacture of
vapour deposition systems used to coat materials with thin films
and are used for academic and industrial research .
The initial purchase price of Korvus, paid in cash at
completion, amounted to GBP2.6 million. Additionally, an earn-out
of up to GBP0.4 million is payable based on Korvus' adjusted EBIT
in the year to 31 March 2021, together with an amount to reflect
any excess cash and working capital over and above the ongoing
requirements of the business. The excess cash was covered by cash
inherited at the completion date and was paid in December 2020.
The summary provisional fair value of the cost of this
acquisition includes the components stated below:
Consideration GBP000
------------------------------------------------------------------ ------
Initial cash consideration 2,640
Earn-out -
------------------------------------------------------------------ ------
2,640
------------------------------------------------------------------ ------
Gross cash inherited on acquisition 394
Cash retained in the business (194)
------------------------------------------------------------------ ------
Payment in respect of surplus working capital 200
------------------------------------------------------------------ ------
Total consideration 2,840
------------------------------------------------------------------ ------
Acquisition-related transaction costs charged to the Consolidated
Statement of Comprehensive Income 175
------------------------------------------------------------------ ------
The acquisition of Korvus was primarily financed via drawdown
from the Group's GBP35.0 million acquisition facility from Lloyds
Bank Corporate Markets.
The summary provisional fair values recognised for the assets
and liabilities acquired are as follows:
Accounting Fair
policy value Fair
Book value alignments adjustments value
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ----------- ------------ ---------
Intangible assets - - 1,380 1,380
Property, plant and equipment 15 - - 15
Right-of-use leased assets - 37 - 37
Deferred tax assets - - 10 10
Inventories 264 - (53) 211
Trade and other receivables 403 (3) - 400
Cash and cash equivalents 394 - - 394
---------------------------------------- ----------- ------------ ------- -----
Total assets 1,076 34 1,337 2,447
---------------------------------------- ----------- ------------ ------- -----
Deferred tax liabilities - - (262) (262)
Trade payables (49) - - (49)
Right-of-use lease liabilities - (35) - (35)
Current tax liability (177) - - (177)
---------------------------------------- ----------- ------------ ------- -----
Total liabilities (226) (35) (262) (523)
---------------------------------------- ----------- ------------ ------- -----
Net identifiable assets and liabilities 850 (1) 1,075 1,924
---------------------------------------- ----------- ------------ ------- -----
Total consideration 2,840
---------------------------------------- ----------- ------------ ------- -----
Goodwill recognised 916
---------------------------------------- ----------- ------------ ------- -----
Intangible assets recognised were acquired customer
relationships, the value of the acquired future committed order
book, acquired technology and Korvus' brand. The goodwill
recognised, inclusive of the workforce and knowhow, has been
allocated to the Vacuum Sciences segment.
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 and the fair value of the assets. A further fair value
adjustment was made to inventory provisions together with the
related deferred tax. Adjustments to property, plant and equipment
and right-of-use assets and liabilities were made to align with
Group accounting policies.
This acquisition resulted in a profit after tax (before
adjusting items) attributable to owners of the parent company of
GBP136,000 in the period post-acquisition. After amortisation of
intangible assets, the contribution to owners of the parent
company's results amounted to a profit of GBP39,000 after tax.
If the acquisition had completed on 1 January 2020, based on
pro-forma results, revenue for the Group for the year ended 31
December 2020 would have increased by a further GBP1,000,000 and
profit after tax (before adjusting items) attributable to the
owners of the parent company would have increased by a further
GBP375,000 after allowing for interest costs. Amortisation of
intangible assets on a pro-forma basis from 1 January 2020 to the
date of acquisition would have been GBP245,000.
Increased shareholding in PE.fiberoptics Limited
On 31 March 2020, Judges purchased the remaining 25.5% minority
shareholding held in PE.fiberoptics Limited ("PFO") for a cash
consideration of GBP1.1 million. As a result, Judges increased its
ownership of the shares in PFO from 74.5% to 100%. The transaction
was financed from Judges existing cash resources.
As this acquisition results in the entity becoming a wholly
owned subsidiary, the purchase was accounted for by reducing the
Non-Controlling Interest as at the date of the acquisition to
GBPnil, and the remaining balance recorded through equity
reserves.
Acquisition of Moorfield Nanotechnology Limited
No changes were made to the provisional acquisition accounting
as presented in the 2019 Annual Report and Accounts.
Post balance sheet increase of shareholding in Bordeaux
Acquisition Limited
On 16 February 2021, Judges acquired 12.5% of the shares in
Bordeaux Acquisition Limited for a cash consideration of GBP1.8
million, increasing its shareholding from 75.5% to 88%. The
transaction was financed from Judges existing cash resources.
6. Dividends
2020 2019
------------------ ------------------
Pence Pence
per share GBP000 per share GBP000
-------------------------------------- ---------- ------ ---------- ------
Final dividend for the previous year 35.0 2,195 28.0 1,742
Interim dividend for the current year 16.5 1,036 15.0 933
-------------------------------------- ---------- ------ ---------- ------
Total final and interim dividend 51.5 3,231 43.0 2,675
Special dividend - - 200.0 12,451
-------------------------------------- ---------- ------ ---------- ------
51.5 3,231 243.0 15,126
-------------------------------------- ---------- ------ ---------- ------
The Directors will propose a final dividend of 38.5p per share,
amounting to GBP2,425,000, for payment on 9 July 2021. 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.
7 . Final Results Announcement
This final results announcement, which has been agreed with the
auditors, was approved by the Board of Directors on 22 March 2021.
It is not the Group's statutory accounts. Copies of the Group's
audited statutory accounts for the year ended 31 December 2020 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 audit reports for the years ended 31 December 2020 and 31
December 2019 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 2019 have been delivered to the Registrar of
Companies, but the 31 December 2020 accounts have not yet been
filed.
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END
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March 23, 2021 03:00 ET (07:00 GMT)
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