Judges Scientific Regulatory News (JDG)

Judges Scientific plc

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

27 March 2015

PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

Highlights:

· Record revenues of £40.6 million (2013: £36.0 million) but a 3.0% decrease on a like-for-like basis

· Pre-tax profit before exceptional items and non-controlling interests down 11.8% to £6.5 million (2013: £7.3 million)

· Basic earnings per share, excluding exceptional items, down 17.7% to 82.7p (2013: 100.5p); corresponding figures including exceptional items: 35.7p (2013: 23.4p)

· Fully diluted earnings per share, excluding exceptional items, down 16.5% to 80.5p (2013: 96.4p)

· Proposed final dividend of 14.7p (2013: 13.4p), making a total distribution for the year of 22.0p (2013: 20.0p), a 10.0% increase

· Cash generated from operations of £7.5 million (2013: £5.0 million)

· Cash in hand of £11.1 million as at 31 December 2014; adjusted net debt of £1.3 million (2013: £5.2 million)

· New £10 million acquisition facility arranged in December

· Acquisition of Armfield Limited post year end

Alex Hambro, Chairman of Judges Scientific, commented:

"The year just closed proved disappointing with weak order intake in most of our businesses progressively affecting all measures of performance. On the other hand our business model remains intact, supported by solid cash generation, as evidenced by the £10 million acquisition of Armfield announced early in the New Year."

Chairman's Statement

The last year was undoubtedly challenging for Judges. The scientific instrumentation sector had generally experienced patchy demand in the past two to three years and this finally affected most of the Group in the course of 2014. For the ninth consecutive year, sales reached a record £40.6 million (2013: £36.0 million) but adjusted pre-tax profits and adjusted earnings per share declined. Despite this, cash generation was strong and the Group's ability to increase the dividend and pursue acquisitions remains very much intact.

Trading in 2014

Group revenues for the financial year ended 31 December 2014 advanced from £36.0 million to £40.6 million. This reflects an organic contraction of 3.0% offset by a full year's contribution from Scientifica Limited ("Scientifica") compared to six months in 2013. For the year as a whole and excluding Scientifica, revenues decreased 5.3% in continental Europe, encompassing a particularly weak performance in Germany (down 41.1%) partially offset by a 29.4% increase in France. Turnover declined 8.8% in the USA but registered a 55.9% increase in Canada. Elsewhere, revenues were 21.5% lower in China, stable in the UK and buoyant in Australasia and the rest of the world. In part we believe this picture reflects a general reduction in levels of government funded scientific capital expenditure as a consequence of austerity programmes in many advanced economies. It is difficult to predict when the climate will improve substantially but we believe the need to advance scientific research capabilities remains an imperative for both developed and emerging economies.

Profit before tax, exceptional items and non-controlling interests declined by 11.8% to £6.5 million (2013: £7.3 million), with the operating contribution of the businesses owned as at 1 January 2014 (i.e. excluding Scientifica) down 20.6%. The operating subsidiaries (including Scientifica) produced a Return on Total Invested Capital of 24.0% (2013: 30.2%).

Basic earnings per share before exceptional items declined by 17.7% from 100.5p to 82.7p. The contraction in earnings per share reflected lower profits and the dilution created by the full-year effects of the October 2013 share placing. Fully diluted earnings per share before exceptional items decreased 16.5% to 80.5p (2013: 96.4p).

Exceptional items include the amortisation of intangible assets, tax relief arising from the issue of shares to employees and other non-trading items, as set out in the Income Statement. Profit, including exceptional items but before tax and non-controlling interests, amounted to £2.4 million (2013: £1.2 million). Including exceptional items, basic earnings per share amounted to 35.7p (2013: 23.4p) while fully diluted earnings per share totalled 34.7p (2013: 22.5p).

Mirroring widespread experience in the scientific instruments sector at various times in recent years, the Group suffered weak order intake in most of its businesses during the first three quarters of the financial year. During the first half, the Group managed to mitigate the impact on the income statement of this slowdown in orders but at the expense of a first-half reduction in the order book from 10.5 weeks to 7.8 weeks. This progressively affected the trading performance of the Group's operations. Order intake recovered in the last quarter, thereby restoring the order book to 9.9 weeks of budgeted sales.

Your Board attributes the difficult trading environment to risk factors it has consistently highlighted in the past: the aforementioned restrictions in public spending in many advanced economies, a slowdown in China and, especially in the first half of the year, the strength of Sterling.

Financial position

Cash-flow was strong during 2014. Cash generated from operations amounted to £7.5 million (2013: £5.0 million) and adjusted net debt as at 31 December 2014, excluding subordinated debt owed to non-controlling shareholders, reduced to just £1.3 million (2013: £5.2 million). Year-end cash balances progressed from £10.1 million to £11.1 million.

In December 2014, the Group's various bank loans (excluding those extended to Bordeaux Acquisition) were consolidated into one five-year term loan. In addition, the bank granted the Company a £10 million revolving acquisition facility; this will facilitate the acquisition process and avoid the need for the Company to hold large amounts of unproductive cash. I would like to place on record the Board's appreciation of the continued backing that the Group receives from its bankers, Lloyds Bank Corporate Markets, in support of its expansion strategy.

Dividends

Your Board is pleased to recommend a final dividend of 14.7p per share (2013: 13.4p per share) which, subject to approval at the forthcoming Annual General Meeting on 27 May 2015, will make a total distribution of 22p per share in respect of 2014 (2013: 20p per share). Despite the proposed increase, the dividend total is still covered almost four times by adjusted earnings per share.

The proposed final dividend will be payable on 10 July 2015 to shareholders on the register on 12 June 2015 and the shares will go ex-dividend on 11 June 2015.

Post Balance sheet events

On 22 January 2015, the Company acquired Armfield Limited ("Armfield"), a company involved in the production and marketing of engineering equipment and research instruments for educational applications and R&D systems focused on the food, beverage, dairy, vegetable oils and pharmaceutical industries. The purchase consideration included an £8.3 million cash payment and a potential £1.5 million earn-out -- 50% in cash and 50% in shares at a price of 2055p per share -- based on Armfield's 2014 profitability. It is expected that this earn-out will be paid in full. Armfield's adjusted EBIT for the calendar year 2013 amounted to £1.66 million. The acquisition was financed from the Company's cash resources and £4.0 million drawn from the new acquisition facility.

After ten years of service, Ralph Cohen, the Group's Finance Director, will retire from his executive position at the end of April. This is a cause of sadness for his colleagues and, I am sure, for the Company's shareholders and other stakeholders. His contribution to Judges Scientific has been immense during this critical period which has seen the Group's market capitalisation develop from £4 million to £100 million. I am pleased that we will continue to enjoy his insight and delightful personality, hopefully for many years, as a Non-Executive Director. He will be succeeded as Group Finance Director by Brad Ormsby who joined the Board on 3 March 2015 after a successful career encompassing PwC, Eurovestech plc and several of its investee companies including Kalibrate Technologies plc where, as CFO, he was actively involved in the company's successful IPO.

Our team

Our employees have continued to uphold your Company's culture of autonomous hard work and engineering excellence during a difficult year. The marketing and sales teams have had to work particularly hard to win business but we believe that these efforts will reward the Group handsomely when the trading environment returns to a more predictable footing. Your Board's thanks go to all our employees and stakeholders for their important contributions during the year.

Current trading and prospects

After experiencing an excellent order inflow during the last quarter of 2014, bookings for the first eleven weeks of 2015 reverted to a similar level to those for the corresponding period in 2014. It is, of course, too early to draw conclusions for the year as a whole, other than to recognise that demand supported by public sector funding remains patchy. On the currency front, the recent strength of the US dollar may well result in a gradual improvement in orders and margins from outside Europe; although the Group's activities in continental Europe could struggle, given the recent weakness of the Euro. The Group started the year with a restored order book, an exciting new acquisition and a solid financial position, and is therefore well equipped to weather any further headwinds should they materialise.

Alex Hambro

Chairman

For further information please contact:

Judges Scientific plc

David Cicurel, CEO

Tel: 01342 323 600

Shore Capital (Nominated Adviser & Broker)

Pascal Keane

Edward Mansfield

Tel: 020 7408 4090

Cardew Group (Financial Public Relations)

Melvyn Marckus

Tel: 0207 930 0777 or 07775 896 491

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2014

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

* - Total represents amounts attributable to equity holders of the parent company.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

1. Earnings per share

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

1. Earnings per share (continued)

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

2. Segment analysis

Segmental revenue is presented on the basis of the destination of the goods where known, failing which on the geographical location of customers. Segment assets are based on the geographical location of assets.

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

3. Maturity of borrowings and net debt

A proportion of the Group's bank loans is drawn in foreign currencies to provide a hedge against assets denominated in those currencies. The Sterling equivalent at 31 December 2014 of loans denominated in Euros was £466,000 (2013: £499,000). These amounts are included in the figures above for bank loans, repayable in years 1 to 5.

NOTES TO THE PRELIMINARY ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2014

4. Post Balance Sheet Event - acquisition of Armfield Limited

On 22 January 2015, the Company acquired the entire issued share capital of Armfield Limited ("Armfield"). Armfield designs and markets engineering equipment and research instruments for educational applications, together with research and development systems focused on the food, beverage, dairy, vegetable oils and pharmaceutical industries. The company is based in Ringwood, Hampshire and New Jersey, USA.

Armfield's audited accounts for the financial year to 31 December 2013 show revenues of £12.2 million and pre-tax profits of £1.3 million. The Directors believe that, had the business been owned by the Group during that year and excluding one-off items, Armfield would have generated operating profits in the order of £1.66 million (before interest, tax, amortisation of intangible assets and expensed transaction costs). The audited accounts also show net tangible assets of £3 million, including cash of £2.56 million.

The acquisition was completed for a cash consideration of £8.28 million, plus estimated transaction costs of £800,000 and an earn-out capped at £1.51 million. The maximum earn-out will be payable if Armfield has generated adjusted operating profits of £1.96 million or more in respect of the twelve month period to 31 December 2014, reducing by five times any shortfall below £1.96 million. Half of the earn-out will be paid in cash and half through the issue of new Ordinary shares in Judges Scientific plc at a price of 2055p per Ordinary share, based on the prevailing price of Judges' Ordinary shares on the day the headline terms of the acquisition were agreed.

An additional payment will be made to reflect any excess working capital over and above the ongoing requirements of the business; the Company expects such payment to be covered by the cash inherited at the completion date. A further payment capped at £360,000 may become due if the triennial actuarial valuation of Armfield's defined benefit pension fund as at 31 March 2017 shows a reduction in the yearly contribution required to eliminate its funding deficit. The defined benefit scheme closed to new members with effect from 2001 and closed to new accrual in 2006.

The acquisition was financed from existing cash resources and an additional £4 million drawn down from the £10 million revolving acquisition facility recently agreed with Lloyds Bank Corporate Markets.

Accounts to the date of completion will be drawn up promptly. However at the time of finalising these financial statements the information required under IFRS 3R concerning the acquired net identifiable assets and liabilities, the fair value of the contingent consideration and the residual goodwill to be recognised was not yet available.

5. Preliminary Announcement

This preliminary announcement, which has been agreed with the auditors, was approved by the Board of Directors on 26 March 2015. It is not the Group's statutory accounts. Copies of the Group's audited statutory accounts for the year ended 31 December 2014 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 Unit 19, Charlwoods Road, East Grinstead, West Sussex RH19 2HL.

The audit reports for the years ended 31 December 2014 and 31 December 2013 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 2013 have been delivered to the Registrar of Companies, but the 31 December 2014 accounts have not yet been filed.