Judges Scientific Plc · LSE:JDG
Judges Scientific — H1 2021 Earnings Presentation
37 slides from Judges Scientific's earnings presentation, Sep 24, 2021
Slide 1: Interim results, six months ended 30 June 2021
Interim results Six months ended 30 June 2021 David Cicurel, CEO Brad Ormsby, CFO Mark Lavelle, COO 24th September 2021
Slide 2: About Judges Scientific
About Judges Scientific • Buy and build model within the scientific instrument market • Favourable market – Long term growth drivers – Large pool of potential acquisitions in global niches – Low capital requirements • Track record of acquisitions and reputation as a good acquirer – Nineteen acquisit
Slide 3: The Judges Group
The Judges Group Moorfield Fire Testing Technology Quorum Technologies Armfield CoolLED Korvus Sircal KE Technology PE.fibreoptics FIRE Instruments Developments Dia-Stron UHV Design Deben GDS EWB Solutions Instruments THT Oxford Aitchee Engineering Scientifica Cryosystems 05 06 07 08 09 10 11 12 13
Slide 4: A snapshot of Group customers
A snapshot of Group customers Universities Industry Other research and compliance OEMs 4
Slide 5: Key Messages
Key Messages Performance Covid-19 impact Outlook Order intake, revenue, profit Remain focused on ensuring Uncertainty remains but and cashflow rebounding health and safety of our positive signs colleagues Restored order book Long-term fundamentals of the Markets and customers have Group unchanged Re
Slide 6: Performance review
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Slide 7: Highlights
Highlights Organic revenue Cash from operations + 5% HY 2021 2018 HY 2021 Total revenue up 15% HY 2020 2017 £ 8.0m HY 2020 (HY 2020: £5.1m) (2016: £2.7 million) Organic order intake + 25% HY 2021 Interim dividend HY 2021 Total order book 17.6 weeks HY 2021 + 15% HY 2020 (2016: £0.7 billion) 19p per
Slide 8: Performance
Performance HY 2021 HY 2020 Variance Variance (£m) (£m) (£m) (%) 5% organic revenue growth and Revenue 43.0 37.4 5.6 15% contribution from THT and Korvus Operating costs (34.2) (30.7) (3.5) 11% acquisitions Adjusted 8.8 6.7 2.1 31% operating profit Operating margin recovered to 20.5% Interest (0.3)
Slide 9: Capitalisation of R&D expenditure
Capitalisation of R&D expenditure • Capitalised in H1 £0.4m of expenditure on new or significantly improved products (in line with IAS38) - historically expensed 100% of R&D costs • Three year amortisation of capitalised expenditure once products are completed • Expected to have diminishing effect o
Slide 10: Order intake
Order intake 100 Millions 90 • Organic order intake up 25% compared with H1 last year – now back 80 to 2019 levels 70 • Intake varied considerably between 60 businesses 50 • Geographically: 40 – UK up 26% 30 – Rest of Europe up 34% – North America up 41% Last 4 months annualised Trailing 12 months B
Slide 11: Revenue summary
Revenue summary • Organic revenue growth across: Origin of orders and revenue by geography – UK by 39% HY2021 HY2020 – Rest of Europe 27% Orders • Organic revenue decline in: – China/Hong Kong by 33% – North America by 16% Revenue 85+% of revenues exported 11
Slide 12: Profit bridge
Profit bridge £000s 12,000 10,000 H1 19 contribution 8,000 6,000 4,000 2,000 0 H1 2020 Organic growth Organic decline Acquisitions H1 2021 contribution* contribution* 12 *Contribution is EBIT from trading subsidiaries before central costs
Slide 13: Balance sheet and cash flow
Balance sheet and cash flow H1 2021 H1 2020 Cashflow summary (£m) (£m) Jun 21 Dec 20 Adjusted EBITDA 9.8 7.6 Balance Sheet summary (£m) (£m) Working capital movements (1.6) (2.1) Cash 17.6 15.5 DB pension contributions (0.2) - Debt (19.3) (21.2) Exceptional transaction costs - (0.4) Adjusted net (de
Slide 14: Return on Total Invested Capital
Return On Total Invested Capital Return on Total Invested Capital ROTIC (Trailing 12 months)* FTT acquisition GDS 50% March 2012 Scientifica 40% June 2013 THT May 2020 30% 20% Armfield 10% January 2015 0% *excludes central costs and properties, and the effect of R&D capitalisation 14
Slide 15: Diversification
Diversification Group revenue Group revenue by geography FTT Sircal PFO GDS Armfield Dia-Stron Quorum UHV EWB Scientifica CoolLED Deben Oxford UK Rest of Europe Moorfield North America THT China/Hong Kong Korvus Rest of World 15
Slide 16: 12½ Year Financial History
12½ Year Financial History Financial history Revenue and profit 200 EPS and Dividends 250.0 20000 100,000 (Excluding special dividends) 80,000 200.0 15000 150 60,000 150.0 10000 100 40,000 100.0 5000 50 20,000 50.0 0 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0 - 2011 2012 2013 20
Slide 17: Refinancing of the Group's banking facilities
Refinancing of the Group’s banking facilities • New 5 year £60m facility from Lloyds in May 2021 replaced £35m facility • £19m term loan; £35m Revolving Credit Facility; £6m accordion • Covenants consistent with previous facility – Gearing no greater than 2.5 times Adjusted EBITDA – Interest cover n
Slide 18: Growth strategy
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Slide 19: Growth drivers
Growth drivers • M&A – Many global niches – Over 2,000 privately held businesses in the UK • Organic growth through – Long term secular organic growth trends in science • Global higher education • Process optimisation – Research and Development • 5-6% of annual revenue – Business optimisation • Lead
Slide 20: Acquisitions
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Slide 21: Acquisition criteria
Acquisition criteria • Strict acquisition discipline • Acquisition attributes: – Strong exporters in their global niche markets; solid EBIT margins – Generate sustainable profits and cashflows – Pay 3 to 6 times EBIT according to size – Borrow up to 2.5 times EBITDA @ 2 to 4% Long deal Crystallisati
Slide 22: Further investment
Further investment • Increased interest in majority owned subsidiary Bordeaux Acquisition Limited from 75.5% to 88% in February 2021 • Consideration was £1.8m (based on an EV of £12.9m plus excess cash) • In 2020, Bordeaux generated £2.8m EBIT Judges initial stake in Bordeaux Judges increased its st
Slide 23: Post acquisition... whilst maintaining autonomy
Post acquisition • Financial – Implement robust financial controls – Reduce debt and reinvest in further acquisitions • Operational – Create environment for businesses to continue to thrive – Support and advice for entity management teams – Peer networking and collaboration – Internal benchmarking t
Slide 24: Outlook and investment case
Outlook and investment case
Slide 25: Outlook
Outlook Confident in Uncertainty Current trading business model remains Strong balance sheet Our markets are global and YTD August organic order intake still affected by the uncertainty remains positive and was 23% up Long-term fundamentals of of the pandemic on 2020 the Group unchanged Capital expe
Slide 26: Investment Case
Investment Case Diverse Sustainable Growing Portfolio Returns Dividends • Robust business model; pursued with discipline • Large pool of targets, every acquisition is earnings enhancing • Strong long-term growth drivers in higher education and process optimization • Well diversified by geography and
Slide 27: Appendices
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Slide 28: Appendices
Appendices • Management team • Major shareholders • Trading businesses • ESG
Slide 29: Management team
Management team • Alex Hambro, Non-Executive Chairman • Experienced adviser to private equity and VC funds and family office investors • David Cicurel, Chief Executive • Founded Judges in 2002; Turnaround specialist and veteran deal-maker • Brad Ormsby, Group Finance Director • Six years at Judges,
Slide 30: Major shareholders – at 21 September 2021
Major shareholders – at 21 September 2021 David Cicurel (including SIPP, SIP and 50,000 non-beneficial) 709,486 11.2% Liontrust 423,901 6.7% Odin Global 374,476 5.9% Danske Bank Asset Management 196,862 3.1% Hargreaves Lansdown 191,730 3.0% Stephen Upton & Jacqueline Upton 187,700 3.0% Baillie Giffo
Slide 31: Our businesses
Our businesses 1 2 3 FTT is internationally recognised as the PE.fiberoptics is a leading manufacturer UHV Design, founded in 1993, world’s leading supplier of fire testing of test equipment that measures optical specialises in the design, manufacture instrumentation and has supplied the and physica
Slide 32: Our businesses
Our businesses 4 5 6 Aitchee Engineering is a well East Sussex-based Quorum Sircal designs, manufactures and established precision engineering Technologies manufactures market- distributes rare gas purifiers typically company that can offer high end sheet leading scientific instruments primarily for
Slide 33: Our businesses
Our businesses 7 8 9 Deben is a precision engineering GDS designs, develops and Scientifica is a multi-award winning, company providing innovative solutions manufactures equipment and software globally recognised manufacturer of for SEM and μX-Ray CT in-situ tensile used for the computer-controlled
Slide 34: Our businesses
Our businesses 10 11 12 Armfield offers unrivalled experience in CoolLED designs and manufactures Dia-Stron is the leading manufacturer the design and provision of teaching cutting-edge illumination systems of automated measurement systems equipment aligned to global for microscopy and other applica
Slide 35: Our businesses
Our businesses 13 14 15 EWB Solutions specialises in the Oxford Cryosystems is a market-leading Moorfield Nanotechnology design and design and manufacture of edge- manufacturer of cryogenic devices. manufactures R&D/pilot-scale laboratory welded metal bellows where a high Spun out of Oxford Universi
Slide 36: Our businesses
Our businesses 16 17 THT is a world leader in the design, Korvus Technology sells and manufacture and supply of specialised manufactures highly modular thin film calorimeters for use in the chemical deposition systems designed to allow and battery industries. Application custom-built systems to be a
Slide 37: Environment, Social & Governance
Environment, Social & Governance • Defined policy to minimise environmental impact across all aspects of business, including consideration for energy consumption and packaging of instruments. Environment • Nature of our business is not capital intensive manufacturing and environmental impact is limi