Source - RNS
RNS Number : 2571K
Judges Scientific PLC
20 September 2016
 



Press release

20 September 2016

 

Judges Scientific plc

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

Interim results for the six months ended 30 June 2016

Key financials 

 

·       Revenues up 9.3% to a record £27.3 million (H1 2015: £24.9 million) including 7.0% organic growth;

·       CoolLED, Dia-Stron and Fire Instrumentation and Research Equipment ("FIRE") acquired during the period for a total consideration of £6.6m;

·       Interim dividend of 9.0p (H1 2015: 8.1p), an increase of 11.1%; covered 3.7 times by adjusted earnings;

·       Organic order intake down 1.6% compared with H1 2015;

·       Organic order book at 10.7 weeks (H1 2015: 11.7 weeks);

·       Adjusted* pre-tax profit down 11.4% to £3.0 million (H1 2015: £3.3 million);

·       Adjusted* basic earnings per share down 19.2% to 33.2p (H1 2015: 41.1p);

·       Cash generated from operations of £2.4 million (H1 2015: £2.3 million);

·       Adjusted* net debt of £10.3 million as at 30 June 2016 (30 June 2015: £7.5 million and 31 December 2015: £4.0 million);

·       Cash balances of £6.0 million as at 30 June 2016 (30 June 2015: £8.2 million and 31 December 2015: £8.5 million).

* Adjusted earnings figures are stated before adjusting items relating to hedging of risks materialising after the end of the period, amortisation of intangible assets, share based payments and acquisition-related costs. Adjusted net debt notionally includes acquisition-related payments which had yet to be settled at the balance sheet date and excludes subordinated debt owed by subsidiaries to minority shareholders.

 

Alex Hambro, Chairman of Judges Scientific, commented: 

"This has been a period of contrast, with success in the pursuit of earnings-enhancing acquisitions and frustration in respect of short-term trading performance. At this stage, the Board therefore believes that the full year results will be significantly below market expectations."

 

 

For further information please contact:

 

Judges Scientific plc

David Cicurel, CEO / Brad Ormsby, Group FD

+44 (0) 20 3829 6970

www.judges.uk.com

 

 

Shore Capital (Nomad and Broker)

Stephane Auton / Edward Mansfield

 

 +44 (0) 20 7408 4090

 

Media enquiries:

Abchurch (Financial Public Relations)

 

Rebecca Clube / Julian Bosdet / Tim Thompson

 

Tel: +44 (0) 20 7398 7714

www.abchurch-group.com

 



 

Chairman's Statement

I am pleased to be able to report, for the eleventh consecutive year, record revenues and dividends. This has been a period of contrast, with success in the pursuit of earnings-enhancing acquisitions and frustration in respect of short-term trading performance. The patchy climate, which has characterised our sector in the last five years and affected its participants at various times to various degrees, has continued to prevail and dampened our performance in the first half of 2016. This resulted in slower order intake and reduced adjusted pre-tax profits and earnings per share for the period.

Acquisitions

During the period under review, the Group completed three acquisitions:

·       CoolLED Limited, which makes LED based illumination systems for fluorescence microscopy, was acquired on 17 February 2016 for £3.6 million including the payment of a £0.1 million earn-out;

·       The business and assets of FIRE were purchased by the Group's subsidiary Fire Testing Technology Limited ("FTT") on 28 March 2016; and

·       Dia-Stron Limited, which makes systems to test the mechanical properties of fibres (predominantly human hair), was acquired on 31 March 2016 for £2.7 million.

The results for the six-month period ended 30 June 2016 include the maiden contribution of these three businesses as well as a full six-month contribution from Armfield Limited (acquired 22 January 2015).  All references to "Organic" data in this statement exclude Armfield, CoolLED and Dia-Stron ("the Acquired Companies"), as they were not owned by the Group as at 1 January 2015, but include the figures relating to FIRE which are neither material nor distinguishable from FTT's. 

Trading performance

Group revenues for the six months ended 30 June 2016 progressed 9.3% to £27.3 million (H1 2015: £24.9 million), as a result of 7.0% Organic growth and of the inclusion of the revenue generated by the Acquired Companies.  Organic sales progressed best in North America, but were weak in the UK (down 13%) and in China / Hong Kong (down 10%). The post-acquisition revenues of CoolLED and Dia-Stron were satisfactory, but Armfield's revenue was down following slow order intake during the first five months of 2016.    Group revenue was also significantly held back by production issues in one of the constituents of the Group's Vacuum division.

As a consequence, organic EBITA contribution declined by 3.4% in the first half of 2016 and adjusted pre-tax profit reduced by 11.4% to £3.0 million (H1 2015: £3.3 million).  Adjusted basic earnings per share decreased 19.2% to 33.2p (H1 2015: 41.1p); the decline is sharper than that of pre-tax profit due to the good performance in H1 2016 of the Group's two part-owned businesses. Adjusted diluted earnings per share contracted from 40.3p to 32.7p. Return on total invested capital ("ROTIC") progressed modestly to 20.8% (based on 12 months to June 2016) from 18.7% a year before.

Consistent with past reports, the Group's figures have been adjusted to present, in the Directors' opinion, the true operating performance of the Group.  The total adjustments of £3.6 million (H1 2015: £4.8 million) include a £2.9 million charge for amortisation of acquired intangible assets (H1 2015: £4.3 million) primarily arising from recent acquisitions.  The adjusting items reduce profit before tax from £3.0 million to a loss of £0.7 million (H1 2015: loss of £1.5 million) and earnings per share to a negative 16.3p for both basic and diluted (H1 2015: negative 24.7p basic and diluted).

Cashflow and net debt

Cash flow during the first half of 2016 was robust, with cash from operations of £2.4 million (H1 2015: £2.3 million) representing 75% of adjusted EBIT. The interim balance sheet includes cash balances of £6.0 million and adjusted net debt of £10.3 million, reflecting the acquisitions during the period and the impact of settling the second interim dividend of £1.0 million; this will reduce the outflow in the second half by the same amount.

Order intake

Across the sector demand has been generally soft and for the third consecutive year, order intake was weak in the first quarter. This year order intake did not start to pick up until June and as a result the organic order book at 30 June 2016 had reduced to 10.7 weeks (30 June 2015: 11.7 weeks). The Group's total order book stood at 10.6 weeks at 30 June 2016.

Dividend

In accordance with the Company's dividend policy, the Board is declaring an interim dividend of 9.0p (2015: 8.1p), which will be paid on Friday 4 November 2016 to shareholders on the register on Friday 7 October 2016. The shares will go ex-dividend on Thursday 6 October 2016. The interim dividend is covered 3.7 times by adjusted earnings. 

 

Outlook

The Group's business environment remains uneven. The long term effect of Brexit is difficult to gauge but, in the short term, the Group benefits from the most favourable global exchange rates since 2009.  Although exports represent a vast majority of the Group's sales, the UK is not an insignificant market and it may remain adverse until the Brexit negotiations are concluded.  China has been an important source of growth and its continued appetite for education and research investment remains an important factor in the Group's development.    The Group remains convinced of the long term growth of the sector, however the Board believes that medium term growth is dampened by its dependence on public funds. As a result the Group is currently more vulnerable to short-term performance fluctuations.  Positively, this has not affected the pursuit of our business model as seen through our continued completion of value enhancing acquisitions.

Order intake in the third quarter continued the more positive trend observed in June and organic order intake since the beginning of the year is now ahead of the comparative period in the prior year. A satisfactory outcome for the year still depends on this improvement being sustained and on a continued revival of Armfield's market and on the resolution of the aforementioned production issues. At this stage, the Board therefore believes that the full year results will be significantly below market expectations.

The Hon. Alexander Hambro

Chairman

20 September 2016

 



 

Condensed consolidated interim statement of comprehensive income

 


Note

Adjusted

£000

Adjusting

 items

£000

Six months to

30 June

2016

£000

Six months to

30 June

2015

£000

Year to

 31 December

2015

£000

Revenue

3

27,258

-

27,258

24,933

56,203

Operating costs


(24,031)

-

(24,031)

(21,359)

(46,953)

Adjusted operating profit

3

3,227

-

3,227

3,574

9,250

Adjusting items

4

-

(3,598)

(3,598)

(4,814)

(7,443)

Operating profit/(loss)


3,227

(3,598)

(371)

(1,240)

1,807

Interest income


8

-

8

12

28

Interest expense

4

(275)

(27)

(302)

(275)

(583)

Profit/(loss) before tax


2,960

(3,625)

(665)

(1,503)

1,252

Taxation (charge)/credit


(585)

575

(10)

128

(138)

Profit/(loss) for the period


2,375

(3,050)

(675)

(1,375)

1,114

Attributable to:







Owners of the parent


2,024

(3,028)

(1,004)

(1,490)

775

Non-controlling interests


351

(22)

329

115

339








Other comprehensive income







Items that will not be reclassified subsequently to profit or loss




Retirement benefits actuarial (losses)/gains




(700)

162

113

Items that may be reclassified subsequently to profit or loss




Exchange differences on translation of foreign subsidiaries

42

(16)

13

Other comprehensive (expense)/income for the period, net of tax

(658)

146

126

Total comprehensive (expense)/income for the period

(1,333)

(1,229)

1,240

Attributable to:







Owners of the parent




(1,662)

(1,344)

901

Non-controlling interests




329

115

339

 





Pence

Pence

Pence

Earnings per share - adjusted







Basic

5



33.2

41.1

109.2

Diluted

5



32.7

40.3

107.3

Earnings per share - total







Basic

5



(16.5)

(24.7)

12.8

Diluted

5



(16.5)

(24.7)

12.6

 



 

Condensed consolidated interim balance sheet

 


Note

30 June

2016

£000

30 June

2015

£000

31 December

2015

£000

ASSETS





Non-current assets





Goodwill


12,860

10,927

10,927

Other intangible assets

6

10,675

11,491

9,088

Property, plant and equipment


5,335

4,704

4,787

Deferred tax assets


625

369

351



29,495

27,491

25,153

Current assets





Inventories


9,275

8,751

7,922

Trade and other receivables


10,091

8,650

11,040

Cash and cash equivalents


5,963

8,242

8,530



25,329

25,643

27,492

Total assets


54,824

53,134

52,645

LIABILITIES





Current liabilities





Trade and other payables


(10,059)

(8,584)

(10,807)

Trade and other payables relating to acquisitions


(905)

(103)

(85)

Borrowings


(2,813)

(3,527)

(3,361)

Current tax liabilities


(1,672)

(1,341)

(1,436)



(15,449)

(13,555)

(15,689)

Non-current liabilities





Borrowings


(13,033)

(12,689)

(9,556)

Deferred tax liabilities


(2,188)

(2,413)

(1,922)

Retirement benefit obligations


(2,296)

(1,535)

(1,394)



(17,517)

(16,637)

(12,872)

Total liabilities


(32,966)

(30,192)

(28,561)

Net assets


21,858

22,942

24,084

EQUITY





Share capital

7

305

304

305

Share premium


14,450

14,380

14,441

Other reserves


2,046

1,974

2,004

Retained earnings


3,975

5,657

6,532

Equity attributable to owners of the parent


20,776

22,315

23,282

Non-controlling interests


1,082

627

802

Total equity


21,858

22,942

24,084

 



 

Condensed consolidated interim statement of changes in equity

 



Share

capital

£000

Share

premium

£000

Other

reserves

£000

Retained

earnings

£000

Total

attributable

to owners

of parent

£000

Non-

controlling

interests

£000

Total

equity

£000


At 1 January 2016

305

14,441

2,004

6,532

23,282

802

24,084


Dividends

-

-

-

(970)

(970)

(49)

(1,019)


Share-based payments

-

-

-

117

117

-

117


Issue of share capital

-

9

-

-

9

-

9


Transactions with owners

-

9

-

(853)

(844)

(49)

(893)


(Loss)/profit for the period

-

-

-

(1,004)

(1,004)

329

(675)


Retirement benefit actuarial losses

-

-

-

(700)

(700)

-

(700)


Foreign exchange differences

-

-

42

-

42

-

42


Total comprehensive (expense)/income for the period

-

-

42

(1,704)

(1,662)

329

(1,333)


At 30 June 2016

305

14,450

2,046

3,975

20,776

1,082

21,858

 



Share

capital

£000

Share

premium

£000

Other

reserves

£000

Retained

earnings

£000

Total

attributable

to owners

of parent

£000

Non-

controlling

interests

£000

Total

equity

£000


At 1 January 2015

300

14,294

1,374

6,910

22,878

512

23,390


Share-based payments

-

-

-

75

75

-

75


Issue of share capital

4

86

616

-

706

-

706


Transactions with owners

4

86

616

75

781

-

781


(Loss)/profit for the period

-

-

-

(1,490)

(1,490)

115

(1,375)


Retirement benefit actuarial gains

-

-

-

162

162

-

162


Foreign exchange differences

-

-

(16)

-

(16)

-

(16)


Total comprehensive (expense)/income for the period

-

-

(16)

(1,328)

(1,344)

115

(1,229)


At 30 June 2015

304

14,380

1,974

5,657

22,315

627

22,942

 



Share

capital

£000

Share

premium

£000

Other

reserves

£000

Retained

earnings

£000

Total

attributable

to owners

of parent

£000

Non-

controlling

interests

£000

Total

equity

£000


At 1 January 2015

300

14,294

1,374

6,910

22,878

512

23,390


Dividends

-

-

-

(1,385)

(1,385)

(49)

(1,434)


Share based payments

-

-

-

119

119

-

119


Issue of share capital

5

147

617

-

769

-

769


Transactions with owners

5

147

617

(1,266)

(497)

(49)

(546)


Profit for the year

-

-

-

775

775

339

1,114


Retirement benefit actuarial gains

-

-

-

113

113

-

113


Foreign exchange differences

-

-

13

-

13

-

13


Total comprehensive income for the year

-

-

13

888

901

339

1,240


At 31 December 2015

305

14,441

2,004

6,532

23,282

802

24,084

The movement in Other reserves of £617,000 arises from the issue of 36,738 shares as part of the consideration for the acquisition of Armfield Ltd.

Condensed consolidated interim cash flow statement

 



Six months to

30 June

2016

£000

Six months to

30 June

2015

£000

Year to

31 December

2015

£000


Cash flows from operating activities





(Loss)/profit after tax

(675)

(1,375)

1,114


Adjustments for:





Financial instruments measured at fair value:





Hedging contracts

48

(172)

10


Contingent consideration measured at fair value

-

25

25


Share-based payments

117

75

119


Depreciation

281

223

482


Amortisation of intangible assets

2,871

4,333

6,736


Loss on disposal of property, plant and equipment

11

16

30


Foreign exchange gains on foreign currency loans

134

(40)

(15)


Interest income

(8)

(12)

(28)


Interest expense

275

246

523


Retirement benefit obligation net interest cost

27

29

60


Contributions to defined benefit plans

-

-

(198)


Tax recognised in income statement

10

(128)

138


(Increase)/decrease in inventories

(823)

(212)

617


Decrease/(increase) in trade and other receivables

1,623

(187)

(2,759)


(Decrease)/increase in trade and other payables

(1,480)

(570)

1,638


Cash generated from operations

2,411

2,251

8,492


Finance costs paid

(275)

(251)

(528)


Tax paid

(512)

(723)

(1,387)


Net cash from operating activities

1,624

1,277

6,577


Cash flows from investing activities





Paid on acquisition of new subsidiaries

(7,248)

(11,421)

(11,421)


Gross cash inherited on acquisition

2,036

3,904

3,904


Acquisition of subsidiaries, net of cash acquired

(5,212)

(7,517)

(7,517)


Paid on the acquisition of trade and assets

(243)

(15)

(33)


Purchase of property, plant and equipment

(571)

(182)

(530)


Interest received

8

12

28


Net cash used in investing activities

(6,018)

(7,702)

(8,052)


Cash flows from financing activities





Proceeds from issue of share capital

9

88

150


Repayments of borrowings

(2,693)

(1,313)

(4,626)


Proceeds from bank loans

5,500

4,755

4,755


Equity dividends paid

(970)

-

(1,385)


Dividends paid - non controlling interest in subsidiary

(49)

-

(49)


Net cash from/(used in) financing activities

1,797

3,530

(1,155)


Net change in cash and cash equivalents

(2,597)

(2,895)

(2,630)


Cash and cash equivalents at start of period

8,530

11,148

11,148


Exchange movements

30

(11)

12


Cash and cash equivalents at end of period

5,963

8,242

 



 

Notes to the interim report

1. General information and basis of preparation

Judges Scientific plc is the ultimate parent company of the Group, whose principal activities comprise the design, manufacture and sale of scientific instruments. The subsidiaries are grouped into two segments: Materials Sciences and Vacuum. The results of the Group's recent acquisitions of Dia-Stron Limited ("Dia-Stron") and the trade and assets of Fire Instrumentation and Research Equipment ("FIRE") are included in the Materials Sciences segment and CoolLED Limited ("CoolLED") is included in the Vacuum segment.

The financial information set out in this interim report for the six months ended 30 June 2016 and the comparative figures for the six months ended 30 June 2015 are unaudited. The interim report has been prepared in accordance with IAS 34 "Interim Financial Reporting". The interim report does not contain all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2015, which have been prepared in accordance with IFRS as adopted by the European Union.

The financial information for the year ended 31 December 2015 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2015 have been filed with the Registrar of Companies. The Auditor's Report in respect of those financial statements was unqualified and did not contain statements under section 498 of the Companies Act 2006.

Judges Scientific plc is the Group's ultimate parent company. The Company is a public limited company incorporated and domiciled in the United Kingdom. Its registered office and principal place of business is 52c Borough High Street, London SE1 1XN. Its shares are quoted on the Alternative Investment Market. The interim report is presented in Sterling, which is the functional currency of the parent company. The interim report has been approved for issue by the Board of directors on 19 September 2016.

2. Significant accounting policies

The interim report has been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2015, except for the taxation policy where, for the purposes of the interims, the tax charge on adjusted business performance is calculated by reference to the estimated effective rate for the full year.

3. Segmental analysis

For the period ended 30 June 2016

Note

Materials

Sciences

£000

Vacuum

£000

Unallocated

items

£000

Total

£000

Revenue


12,555

14,703

-

27,258

Operating costs


(10,634)

(12,693)

(704)

(24,031)

Adjusted operating profit


1,921

2,010

(704)

3,227

Adjusting items

4




(3,625)

Operating loss





(398)

Net interest expense





(267)

Loss before tax





(665)

Income tax charge





(10)

Loss for the period





(675)

 

For the period ended 30 June 2015

Note

Materials

Sciences

£000

Vacuum

£000

Unallocated

items

£000

Total

£000

Revenue


11,652

13,281

-

24,933

Operating costs


(10,027)

(10,931)

(401)

(21,359)

Adjusted operating profit


1,625

2,350

(401)

3,574

Adjusting items

4




(4,843)

Operating loss





(1,269)

Net interest expense





(234)

Loss before tax





(1,503)

Income tax credit





128

Loss for the period





(1,375)

 



 

3. Segmental analysis (continued)

For the year ended 31 December 2015

Note

Materials

Sciences

£000

Vacuum

£000

Unallocated

items

£000

Total

£000

Revenue


28,347

27,856

-

56,203

Operating costs


(22,894)

(22,957)

(1,102)

(46,953)

Adjusted operating profit


5,453

4,899

(1,102)

9,250

Adjusting items

4




(7,503)

Operating profit





1,747

Net interest expense





(495)

Profit before tax





1,252

Income tax charge





(138)

Profit for the year





1,114

 

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

Segment assets and liabilities

At 30 June 2016

Materials

Sciences

£000

Vacuum

£000

Unallocated

items

£000

Total

£000

Assets

13,531

16,257

25,036

54,824

Liabilities

(6,043)

(6,872)

(20,051)

(32,966)

Net assets

7,488

9,385

4,985

21,858

Capital expenditure

217

350

4

571

Depreciation

104

136

41

281

Amortisation

1,376

1,495

-

2,871

 

At 30 June 2015

Materials

Sciences

£000

Vacuum

£000

Unallocated

items

£000

Total

£000

Assets

14,877

13,223

25,034

53,134

Liabilities

(5,576)

(6,048)

(18,568)

(30,192)

Net assets

9,301

7,175

6,466

22,942

Capital expenditure

42

115

25

182

Depreciation

75

120

28

223

Amortisation

3,090

1,243

-

4,333

 

At 31 December 2015

Materials

Sciences

£000

Vacuum

£000

Unallocated

items

£000

Total

£000

Assets

14,370

14,070

24,205

52,645

Liabilities

(6,562)

(7,026)

(14,973)

(28,561)

Net assets

7,808

7,044

9,232

24,084

Capital expenditure

117

202

211

530

Depreciation

185

233

64

482

Amortisation

4,246

2,490

-

6,736

 

Unallocated items are borrowings, intangible assets and goodwill arising on acquisition, deferred tax, defined benefit obligations and parent company net assets.

 

Geographic analysis

Six months to

30 June

2016

£000

Six months to

30 June

2015

£000

Year to

31 December

2015

£000

UK (domicile)

4,263

4,679

9,303

Rest of Europe

6,459

6,036

13,822

United States/Canada

7,427

4,833

12,526

Rest of the world

9,109

9,385

20,552

Revenue

27,258

24,933

56,203

4. Adjusting items


Six months to

30 June

2016

£000

Six months to

30 June

2015

£000

Year to

31 December

2015

£000

Amortisation of intangible assets

2,871

4,333

6,736

Contingent consideration measured at fair value

-

25

25

Financial instruments measured at fair value:




Hedging contracts

48

(172)

10

Share-based payments

117

75

119

Acquisition costs

562

553

553

Total adjusting items within operating profit

3,598

4,814

7,443

Retirement benefits obligation net interest cost

27

29

60

Total adjusting items

3,625

4,843

7,503

Taxation

(575)

(845)

(1,615)

Total adjusting items net of tax

3,050

3,998

5,888

Attributable to:




Owners of the parent

3,028

3,967

5,839

Non-controlling interests

22

31

49


3,050

3,998

5,888

 

5. Earnings per share


Note

Six months to

30 June

2016

£000

Six months to

30 June

2015

£000

Year to

31 December

2015

£000

Profit/(loss) for the period attributable to owners of the parent





Adjusted profit


2,024

2,477

6,614

Adjusting items

4

(3,028)

(3,967)

(5,839)

(Loss)/profit for the period


(1,004)

(1,490)

775



 

Pence

Pence

Pence

Earnings per share - adjusted





Basic


33.2

41.1

109.2

Diluted


32.7

40.3

107.3

Earnings per share - total





Basic


(16.5)

(24.7)

12.8

Diluted


(16.5)

(24.7)

12.6



 

Number

Number

Number

Issued Ordinary shares at start of the period

7

6,098,549

5,996,211

5,996,211

Movement in Ordinary shares during the period

7

3,500

72,238

102,338

Issued Ordinary shares at end of the period

7

6,102,049

6,068,449

6,098,549

Weighted average number of shares in issue


6,100,557

6,024,498

6,054,699

Dilutive effect of share options


83,414

121,213

109,140

Weighted average shares in issue on a diluted basis


6,183,971

6,145,711

6,163,839

 

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

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 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 is calculated as above whilst substituting total profit for adjusted profit.

6. Other intangible assets

The following tables show the significant additions to and amortisation of intangible assets:


Carrying

amount at

1 January

2016

£000

Acquisition

£000

Amortisation

£000

Carrying

amount at

30 June

2016

£000

Distribution agreements

750

272

(298)

724

Research and development

2,903

1,841

(713)

4,031

Customer relationships

858

1,077

(682)

1,253

Brand and domain names

4,577

1,058

(968)

4,667

Sales order backlog

-

210

(210)

-

Total

9,088

4,458

(2,871)

10,675

 


Carrying

amount at

1 January

2015

£000

Acquisition

£000

Amortisation

£000

Carrying

amount at

30 June

2015

£000

Distribution agreements

562

707

(250)

1,019

Research and development

2,199

1,905

(584)

3,520

Customer relationships

1,700

402

(658)

1,444

Brand and domain names

4,201

2,201

(894)

5,508

Sales order backlog

-

1,947

(1,947)

-

Total

8,662

7,162

(4,333)

11,491

 


Carrying

amount at

1 January

2015

£000

Acquisition

£000

Amortisation

£000

Carrying

amount at

31 December

2015

£000

Distribution agreements

562

707

(519)

750

Research and development

2,199

1,905

(1,201)

2,903

Customer relationships

1,700

402

(1,244)

858

Brand and domain names

4,201

2,201

(1,825)

4,577

Sales order backlog

-

1,947

(1,947)

-

Total

8,662

7,162

(6,736)

9,088

7. Share capital

Movements in the Group's Ordinary shares in issue are summarised as follows:

Ordinary shares of 5p each

Six months to

30 June 2016

Number

Six months to

30 June 2015

Number

Year to

31 December

2015

Number

Issued and fully paid




Start of the period

6,098,549

5,996,211

5,996,211

Shares issued as part of the Armfield earn-out

-

36,738

36,738

Exercise of share options

3,500

35,500

65,600

End of the period

6,102,049

6,068,449

6,098,549

 

During the first six months of 2016 the following allotments took place:

•   3,500 Ordinary shares were issued to satisfy the exercise of share options as follows:

•    on 23 February 2016 when the mid-market share price was 1,517.5p;

•    on 1 April 2016 when the mid-market share price was 1,682.5p; and

•    on 3 May 2016 when the mid-market share price was 1,857.5p.

8. Changes in net debt

Changes in net debt for the six months ended 30 June 2016 were as follows:


1 January

2016

£000

Cash flow

£000

Non-cash

items

£000

30 June

2016

£000

Cash at bank and in hand

8,530

(2,596)

29

5,963

Bank debt

(12,390)

(2,807)

(134)

(15,331)

Net senior debt

(3,860)

(5,403)

(105)

(9,368)

Effect of payments relating to the acquisition of CoolLED Limited not settled at 30 June 2016 (included within current liabilities)

-

(101)

-

(101)

Effect of payments relating to the acquisition of

Dia-Stron Limited not settled at 30 June 2016 (included within current liabilities)

-

(742)

-

(742)

Effect of payments relating to the 2012 acquisition of the trade and certain assets of KE Developments Limited not settled at 30 June 2016 (included within current liabilities)

(85)

23

-

(62)

Adjusted net debt

(3,945)

(6,223)

(105)

(10,273)

Subordinated loans

(497)

-

-

(497)

Total net debt

(4,442)

(6,223)

(105)

(10,770)

 

Non-cash items represent foreign exchange differences on bank loans.

9. Acquisitions

During the six months to 30 June 2016, the Group completed 3 separate acquisitions namely the purchase of CoolLED Limited, Dia-Stron Limited and the trade and assets of Fire Instrumentation and Research Equipment.

On 18 February 2016, the Group acquired 100% of the issued share capital of CoolLED Limited, an instrument maker based in Andover, Hampshire. CoolLED designs, manufactures and markets illumination systems for fluorescence microscopy. CooLED was acquired for an initial cash consideration of £3.5 million, a payment to reflect excess working capital and an earn-out capped at £1.0 million calculated via achievement of adjusted operating profits of over £1.0 million in respect of the year to 30 June 2016, reducing by £4.50 for each £1 shortfall below £1.0 million. On 8 August 2016 £0.1 million was paid in full settlement of the earn-out.

 

On 29 March 2016, the Group acquired the trade and certain assets of FIRE, a fire testing equipment manufacturing and servicing business. The purchase consideration is not material in the context of the overall Judges group.

 

On 1 April 2016 the Group acquired 100% of the issued share capital of Dia-Stron Limited a company which designs and manufactures systems to test the mechanical properties of fibres and is based in Andover, Hampshire. Dia-Stron was acquired for a cash consideration of £2.75 million plus a payment to reflect excess working capital.

 

The summary provisional fair value of the costs of these acquisitions includes the components stated below:


Consideration

£000


Initial cash consideration

6,467


Deferred consideration to be paid in cash

101



6,568


Gross cash inherited on acquisition

2,036


Cash retained in the business

(293)


Payment in respect of surplus working capital

1,743


Total consideration

8,311


Acquisition-related transaction costs charged to the income statement

562

 

The consideration and associated transaction costs for these transactions were financed from existing cash resources and £3.5 million was drawn down from the Group's existing £10 million acquisition loan facility.



 

9. Acquisitions (continued)

The summary provisional fair values recognised for the assets and liabilities acquired are as follows:


Book value

£000

Fair value

adjustments

£000

Fair value

£000

Property, plant and equipment

256

-

256

Intangible assets

-

4,458

4,458

Deferred tax assets

94

18

112

Inventories

734

(204)

530

Trade and other receivables

621

-

621

Cash and cash equivalents

2,036

-

2,036

Total assets

3,741

4,272

8,013

Deferred tax liabilities

-

(854)

(854)

Trade payables

(569)

(50)

(619)

Current tax liability

(162)

-

(162)

Total liabilities

(731)

(904)

(1,635)

Net identifiable assets and liabilities

3,010

3,368

6,378

Total consideration



8,311

Goodwill recognised



1,933

 

Management performed a detailed review of each of the acquiree's intangible assets. The intangible assets recognised reflect recognition of acquired customer relationships, the value of the acquired future committed order books, internally generated technology, trademarks, domain names and distributor relationships. A significant amount of the value of the acquired business is attributable to its workforce and sales knowhow. As no assets can be recognised in respect of these factors, they contribute to the goodwill recognised upon acquisition.

Other fair value adjustments reflect specific inventory provisions and accruals and related deferred tax assets. 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.

The acquisitions resulted in a profit after tax (before adjusting items) attributable to owners of the parent company of £327,000 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 £61,000 after tax.

If the acquisitions had been acquired on 1 January 2016, based on pro-forma results, revenue for the group for the period to 30 June 2016 would have increased by £792,000 and profit after tax (before adjusting items) attributable to owners of the parent company would have increased by £199,000 after allowing for interest costs but before charging amortisation of intangible assets (a reduction of £132,000 after charging additional amortisation of intangible assets of £331,000).

10. Defined Benefit Scheme

The Group's defined benefit pension scheme liability has increased to £2.3 million compared to £1.4 million at 31 December 2015. This increase in liability is mainly attributable to a significant reduction of 0.9% in the Discount rate to 3.00% from 3.90% at 31 December 2015.

11. Dividends

During the period, the Company paid a second interim dividend of 15.9p per share (£1.0 million) on 22 March 2016 relating to the financial year ended 31 December 2015 (2015: £nil).

The Company also paid a final dividend of 1.0p per share (£0.1 million) on 8 July 2016 relating to the financial year ended 31 December 2015.

The Company will pay an interim dividend for 2016 of 9.0p per share on 4 November 2016 to shareholders on the register on 7 October 2016. The shares will go ex-dividend on 6 October 2016.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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