Judges Scientific Regulatory News (JDG)

19 March 2019

Judges Scientific plc

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

FINAL RESULTS

Record revenue, order intake and cash generation underpinning 25% increase in dividend

Judges Scientific, a group involved in the buy and build of scientific instrument businesses, is pleased to announce its Final Results for the year ended 31 December 2018.

Highlights

· Revenues up 9% to a record £77.9 million (2017: £71.4 million), including 5.5% Organic* growth;

· Adjusted** operating profit up 35% to £14.7 million (2017: £10.9 million);

o Statutory operating profit of £10.7 million (2017: £5.7 million);

· Adjusted** basic earnings per share up 39% to 183.4p (2017: 131.9p);

o Statutory basic earnings per share of 137.5p (2017: 65.6p);

· Final dividend of 28p, totalling 40p for the year, an increase of 25%; covered 4.6 times by adjusted earnings;

· Organic* order intake up 6.2% compared with 2017;

· Order book at 14.4 weeks (1 January 2018: 14.9 weeks);

· New 5-year acquisition facilities for aggregate £35 million;

· Cash generated from operations of £15.7 million (2017: £10.9 million);

· Adjusted** net cash of £0.9 million as at 31 December 2018 (31 December 2017: £8.0 million net debt);

o Statutory net cash of £0.7 million at 31 December 2018 (31 December 2017: £7.6 million net debt);

· Cash balances of £15.7 million as at 31 December 2018 (31 December 2017: £10.7 million).

* Organic describes the performance of the Group including businesses acquired prior to 1 January 2017.

** Adjusted earnings figures exclude adjusting items relating to amortisation of 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 minority shareholders.

Alex Hambro, Chairman of Judges Scientific, commented:  

"2018 saw the Group achieve new records for order intake, sales, adjusted profits, cash generation and earnings per share; this was driven by strong demand for our products, continued operational improvements and very favourable foreign exchange rates. 2019 has started well and, with a robust balance sheet and a strong order book, Judges is well positioned to face an uncertain macro and political climate."

Notes to editors:

Judges Scientific plc (AIM: JDG), is a group involved in the buy and build of scientific instrument businesses. The Group currently consists of 16 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 has received five Queens' awards for innovation and export.

Judges Scientific maintains a policy to selectively acquire businesses that generate sustainable profits and cash. Shareholder returns are created through the reduction of debt, payment of increasing dividends and through organic growth which the Group encourages by creating an environment for businesses to thrive in, with support and advice for entity management teams.

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

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

CHAIRMAN'S STATEMENT

I am delighted to report that in the financial year ended 31 December 2018, the Group achieved new records in order intake, revenues, cash generation, adjusted pre-tax profit and adjusted earnings per share. In the absence of an acquisition the Group has achieved a net cash position at the year-end providing a robust position for future corporate development when opportunities arise. Pleasingly the performance has been achieved this year through organic growth and efforts to achieve operational excellence, highlighting the inherent commercial strength of the businesses within the Group. The long-term growth drivers in the scientific instruments industry remain robust and, whilst volatility in short term demand remains a feature within our sector, the climate - and exchange rates - were in our favour as evidenced by the consistently strong demand for our products observed over more than the last two and a half years.

Delivering 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 28p, making a total of 40p in respect of 2018, a 25% increase on the prior year (2017: 32p). As a result of this payment, the Company will have returned to its original shareholders in cumulative dividends more than twice the Company's original subscription price.

Strategy

The Group's strategy continues to be based on creating shareholder returns through highly selective and carefully structured acquisitions, underpinned by diversified, solid and consistent earnings and cash-flows arising from our existing businesses.

The Group's policy is to acquire small/medium-sized scientific instrument companies, 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 acquiring businesses with sustainable profits and cash-flows 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. On the back of the growth of our Group it has been able to promptly reduce the acquisition debt, generating the resources to reinvest in further acquisitions, 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 shareholders despite, as we have observed since 2014, the potential for some short-term variability in performance. 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

This was the first year of activity for our new Chief Operating Officer, Mark Lavelle. His contribution has been very positive and we are confident that his impact on the quality of our operations will provide a strong and growing enhancement to organic profitability.

Your Board was strengthened by the addition of Charles Holroyd as an independent Non-Executive Director. His general business acumen and knowledge of our sector will be of great benefit to the Group. Glynn Reece has left the Board but we are pleased that he will continue his long and successful association with Judges as Company Secretary.

Of course, the good performance achieved in 2018 is primarily the result of the great competence and hard work of all our colleagues at every level. The Board and, I am sure, our shareholders are grateful for their efforts that have created such a positive performance. 

Alex Hambro

Chairman

18 March 2019

CHIEF EXECUTIVE'S REPORT

Performance

Revenues

Group revenues for the financial year ended 31 December 2018 progressed from £71.4 million to £77.9 million, an increase of 9%. This reflects Organic growth of 5.5% and the full year contribution of Oxford Cryosystems which was acquired in July 2017. For the year as a whole and excluding the business acquired since 1 January 2017 (this is the meaning of "Organic" in this Report and Accounts), revenues grew strongly across most of the mature economies with UK turnover increasing by 18%, the Rest of Europe up 22% and North America up 11%. China/Hong Kong was down 8% following the strong 39% growth the previous year; the Rest of the World was down by 17%. Customers outside the UK tend to appraise the value of what they purchase in currencies other than Sterling and the weakness in Sterling throughout most of the year assisted the strength of our exports. Country by country, the most impressive swings were in the USA (up £1.9 million) and in the UK (up £1.5 million) followed by the Czech Republic, Germany and Taiwan. The Group is a strong exporter and well diversified across the globe, with 27% of the Group's revenues earned in North America, 30% in the Rest of Europe, 10% in China/Hong Kong and 20% in the Rest of the World.

Profits

Profit before tax and adjusting items progressed 37% to £14.3 million (2017: £10.4 million). Organic operating contribution was up 30% driven by improved demand throughout the Group, by good progress at the business which had suffered operating issues and by the very favourable exchange rates prevailing since the Brexit vote. The operating subsidiaries combined produced a Return on Total Invested Capital of 27.6% (2017: 20.6%).

The Group has continued to invest in the improvement of its existing products and the development of new products. Investment in research and development amounted to £4.6 million in 2018 (2017: £3.5 million), equivalent to 5.9% of Group revenue.

Earnings per share were enhanced largely by the positive Organic trading performance but also by a full years ownership of Oxford Cryosystems and the impact of our increased shareholdings in Bordeaux Acquisition (from 51% to 75.5% in July 2017) and in PE.fiberoptics (from 51% to 67.5% in August 2018). Basic earnings per share before adjusting items advanced by 39% from 131.9p to 183.4p; fully diluted earnings per share before adjusting items also improved 39% to 180.6p (2017: 130.3p).

Order intake

The positive momentum benefitting the Group since June 2016 continued throughout 2018; this strength was observed across most Group companies and progress was made across all major export zones with the UK up 22%, Europe ahead by 14%, North America up by 14% and China/Hong Kong up 1% although the rest of the World was down 15%. This resulted in a 6% increase in Organic order intake compared to 2017. The robust demand enabled the improved sales and left the Group with a healthy order book at 31 December 2018 representing 14.4 weeks of budgeted sales (2017: 14.9 weeks).

Cashflow

The strong trading performance produced abundant cashflow with cash generated from operations of £15.7 million (2017: £10.9 million). At 31 December 2018 the Group was in a net cash position with adjusted net cash excluding subordinated debt owed to non-controlling shareholders (and for 2017, including sums still due in respect of an acquisition) amounting to £0.9 million (2017: £8.0 million net debt). Statutory net cash was £0.7 million (2017: statutory net debt of £7.6 million).

Dividends

Your Board is recommending a final dividend of 28p per share subject to approval at the forthcoming Annual General Meeting on 22 May 2019, which will make a total distribution of 40p per share in respect of 2018 (2017: 32p per share). Despite the proposed 25% increase, the total dividend per share is more than four and a half times covered by adjusted earnings per share (2017: four times).

The proposed final dividend, if approved by shareholders, will be payable on 5 July 2019 to shareholders on the register on 7 June 2019 and the shares will go ex-dividend on 6 June 2019.

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 increased worldwide investment in higher education and a growing trend towards 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. Alongside these external variables, the uncertainty in research funding in the UK resulting from Brexit may have a continuing influence on commercial activity in some of our businesses.

As a large percentage of the Group's sales are 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. Exchange rates during 2018 have been nearly the most favourable we have seen since 2009.

Acquisitions

As a buy and build group, the acquisition of new businesses is a fundamental feature of Group strategy. Executing this effectively is required to ensure that long-term value is generated for shareholders.

The industry in which we operate consists of a multitude of small global niches as highlighted 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 reputation over the past decade as an 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, 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.

In 2018 no acquisition was completed. This is a reflection of the disciplined attitude of your Board and the erratic nature of deal origination given that most of our acquisitions arise from the seller's intention to retire.

Thirteen years after Judges backed the management buy-out of PE.fiberoptics ("PFO"), one of its original founders retired. PFO offered to buy-back half of its own shares using part of its surplus cash. All shareholders except Judges took advantage of the offer and, as a result, the Group's percentage holding in PFO increased from 51% to 67.5%.

Current trading and prospects

Judges has started 2019 with a strong financial position and a solid order book; order intake in the first ten weeks of the new year was ahead of the corresponding prior year period.

Our business will continue to be influenced by public spending around the world and trade tensions (including Brexit) could impact our performance. More significantly, following a resolution on Brexit, which will be addressed at some point, Sterling's fate ought to be driven again by economic rather than political factors; we are well hedged for the current year but a stronger Sterling would not be positive in the medium term. Our well diversified Group has shown its resilience and the underlying strength of our business justifies some optimism for the current year.

David Cicurel

Chief Executive

18 March 2019

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 cashflow generation. All four KPIs have improved in 2018 which reflects positive, profitable order intake across the business and its subsequent conversion into cash.

Revenue

Group revenues grew to £77.9 million compared to £71.4 million in 2017, an increase of 9%. This positive revenue growth included 5.5% Organic growth in the year (2017: 17.8%), which was driven by pleasing performance across our businesses as a whole. The Group's 2017 acquisition also performed as expected.

The overall revenue growth was supported by both segments. The Materials Sciences segment revenues grew by £1.0 million to £35.1 million, an increase of 2.8%, and Vacuum revenues improved by 14.9% to £42.8 million (2017: £37.3 million).

Profits

Adjusted operating profits grew strongly to £14.7 million from £10.9 million in 2017, an increase of 35%. This improvement was driven by the strong revenue growth and, as a Group that exports more than 85% of our goods, we also benefited from the continued weakness in Sterling albeit to a slightly lesser degree than in 2017. As our business has a fairly high fixed cost base, marginal sales improve operating performance, and hence we have seen operating margins continue to improve to 18.9% (2017: 15.2%). This margin increase was also supported by significant improvement at the business which had production issues. Adjusted profit before tax was £14.3 million compared to £10.4 million in 2017, an increase of 37%.

Statutory operating profit increased to £10.7 million (2017: £5.7 million), and statutory profit before tax was £10.2 million compared to £5.1 million in 2017.

Adjusting items

The total pre-tax adjusting items recorded in 2018 were £4.1 million compared to £5.3 million in 2017. Amortisation of intangible assets recognised upon acquisition, as required under IFRS, totalled £3.6 million compared to £4.6 million last year and due to no acquisitions being completed in the year, there were minimal acquisition costs compared to £0.3 million during 2017.

Finance costs

Net finance costs (excluding adjusting items) totalled £0.4 million (2017: £0.5 million). Statutory net finance costs were £0.5 million (2017: £0.6 million), the difference is due to the £0.1 million net finance cost of the defined benefit pension scheme acquired with Armfield in 2015.

Taxation

The Group's tax charge arising from adjusted profit before tax was £2.1 million (2017: £1.5 million). The effective tax rate for adjusted profit is 15.0% compared to 14.2% in 2017. The effective tax rate is influenced by the wider regime of reducing UK and US corporate tax rates and by claims for UK research and development tax credits. This year our effective tax rate has increased as our Group's performance has greatly improved and this has reduced, on a percentage basis, the beneficial impact of R&D tax credits. We continue to perform well in the US however the expected increase in tax payable from this improved performance was mitigated somewhat by the reductions in US Federal tax rates. At the same time, we are still benefiting from a tax rate lower than the standard UK corporation rate and whilst we remain an SME for R&D tax credits, as the Group has less than 500 employees, the Group, as an investor in R&D, will derive benefit from this scheme.

Earnings per share

Adjusted basic earnings per share significantly improved to 183.4p, compared to 131.9p in 2017, an increase of 39.0% and adjusted diluted earnings per share increased by 38.6% to a total of 180.6p (2017: 130.3p).

Statutory basic earnings per share, after reflecting adjusting items which are influenced by the amortisation of intangible assets arising from recent acquisitions, was 137.5p (2017: 65.6p) and statutory diluted earnings per share totalled 135.4p (2017: 64.8p).

Order intake

The Group benefited from strong organic order intake throughout 2018 which followed the positive trend seen through the second half of 2016 and all of 2017. Overall organic order intake was up by 6.2% compared to 2017, and this consistent order intake fuelled the strong performance in 2018 and has given the Group a robust order platform to start 2019. 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. Our order book at 1 January 2019 was a robust 14.4 weeks of budgeted sales (1 January 2018: 14.9 weeks).

Return on Total Invested Capital

The Group closely monitors the return it derives on the capital invested in its subsidiaries. At 31 December 2018 the annual rate of Return on Total Invested Capital ("ROTIC") was 27.6% which compares favourably with 20.6% at the end of 2017. This shows that the Group's momentum continues following the recovery in 2017, and reflects continuing good overall performance across our businesses.

The annual rate of ROTIC is calculated by comparing attributable earnings excluding central costs, adjusting items and before interest, tax and amortisation ("EBITA") with the amounts invested in plant and equipment, unamortised intangibles and goodwill and net current assets (excluding cash).

ROTIC is influenced by the overall performance of our businesses and the size of, and multiple paid for, acquisitions. We continue to strive to improve ROTIC although we remain cognisant of the downward impact that acquiring businesses at higher multiples has on overall ROTIC.

Dividends

In relation to the financial year ended 31 December 2018 the Company paid an interim dividend of 12.0p per share in November 2018. The Board is recommending a final dividend of 28.0p per share giving a total dividend for the year of 40.0p per share (2017: 32.0p per share), an increase of 25%. Dividend cover is more than four and a half times adjusted earnings per share.

Your Group's policy is to pay a progressively increasing dividend provided the Group retains sufficient cash and borrowing resources with which to pursue its longstanding business acquisition policies. 

Headcount

The Group's total number of employees at year end stood at 483 (2017: 456). The change in staff numbers during the year was mainly attributable to growth in manufacturing staff required to meet increased demand.

Share capital and share options

The Group's issued share capital at 31 December 2018 totalled 6,196,678 Ordinary shares (2017: 6,141,128). The shares issued during 2018 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 4,000 (2017: 85,792) and the total share options in issue at the year-end under both the 2005 and 2015 schemes amounted to 249,675 (2017: 306,203).

Defined benefit pension scheme

The Group has a defined benefit pension scheme which was assumed as part of the acquisition of Armfield Limited ("Armfield") in 2015. This scheme has been closed to new members from 2001 and closed to new accrual in 2006. The next full actuarial valuation for the scheme will be in 2020 and, subject to this valuation, the annual contributions to the scheme are £0.2 million. The Group accounts for postretirement 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 2018, the pension liability (net of deferred tax) was £1.5 million (31 December 2017: £1.8 million). The net liability has reduced due to an increase in discount rates during 2018 from 2.5% to 2.8% together with a slight shortening in post-retirement mortality rates, partially offset by reductions in fund 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

This year's strong trading performance has resulted in cash generated from operations of £15.7 million (2017: £10.9 million). The Group has a strong track record of converting profit into cash, and this is reflected in the high cash conversion rate of 106% (2017: 100%). Total capital expenditure on property, plant and equipment amounted to £1.0 million (2017: £0.7 million). Year-end cash balances totalled £15.7 million compared to £10.7 million in 2017.

The Group ended 2018 in a position of £0.9 million of adjusted net cash which compares to £8.0 million of adjusted net debt at the end of 2017, an improvement of £8.9 million. Statutory net cash was £0.7 million (2017: statutory net debt of £7.6 million). This improvement resulted from the strong operational performance across our businesses as a whole and underpins the business model we are continuing to deliver, enabling investment in acquisitions and the Group's growing dividend (£2.1 million). We achieved net cash at 31 December 2018, such that gearing was negative compared to 31 December 2017, which was 0.73 times adjusted operating profit. 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 over the history of our Group.

The Group's financial position continues to be strong. As noted in my report last year, we were seeking to renew our banking facilities and, in April 2018, the Group entered into new banking facilities ("Facility") with Lloyds Banking Group (the "Bank") which replaced its existing banking arrangements. At the point of refinancing, the Group had a total of £12.9 million of loans outstanding.

The Facility is for an aggregate £35.0 million consisting of a £10.0 million term loan ("Term Loan"), a committed £20.0 million revolving credit facility ("RCF") plus a £5.0 million accordion facility, which can be drawn at the discretion of the Bank. The Facility has a five-year term ("Borrowing Term") with covenants and interest consistent with the previous bank facilities.

The Term Loan amortises on a straight-line basis over the Borrowing Term by quarterly instalments. The RCF is repayable in a bullet at the end of the Borrowing Term. The existing lending facilities via Bordeaux Acquisition ("Bordeaux"), the Group's 75.5% owned subsidiary, which owns Deben UK and Oxford Cryosystems, remain unchanged.

We continue to appreciate the support of Lloyds Banking Group and the new Facility provides the Group with further capacity to finance acquisitions to support the Group's buy and build strategy.

Overall, your Group has had a positive year for performance and we are well placed, with a strong balance sheet and significant available borrowing capacity, to continue with its enduring 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

18 March 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2018

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

* On 27 April 2018, £12,896,000 of outstanding loans were repaid and simultaneously reborrowed as the Group renewed its banking facilities (see note 4). 

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

1. Earnings per share

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 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.

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

2. Segment analysis

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

Segment assets and liabilities

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

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

2. Segment analysis (continued)

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

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

4. Bank refinance, maturity of borrowings and net cash/(debt)

In April 2018, the Group entered into new banking facilities (the "Facility") replacing its existing banking arrangements with Lloyds Banking Group. The Facility is for an aggregate £35.0 million consisting of a £10.0 million term loan, a committed £20.0 million revolving credit facility ("RCF") plus a £5.0 million accordion facility, which can be drawn at the bank's discretion. The Facility replaces the previous facilities for which the Group had a total of £12.9 million outstanding. The £12.9 million outstanding loans were repaid and simultaneously reborrowed under the Facility. The Facility has a five-year term ("Borrowing Term") with covenants and interest consistent with the previous bank facilities. The term loan amortises over the Borrowing Term by quarterly instalments. The RCF is repayable in a bullet at the end of the Borrowing Term. The existing facilities via Bordeaux Acquisition Limited, the Group's 75.5% owned facility, remain unchanged.

At the year end, the Group's four bank loans are summarised as follows:

· The first loan of £8,500,000 (2017: £4,482,000) is repayable in quarterly instalments over the period ending 31 March 2023 and bears interest at 1.6% to 2.75% (depending upon gearing) above LIBOR-related rates.

· The second loan of £2,896,000 (2017: £9,001,000) is repayable by 31 March 2023 and bears interest at 1.75% to 2.75% (depending upon gearing) above LIBOR-related rates.

· The third loan of £11,000 (2017: £57,000) is repayable in quarterly instalments over the period ending 31 March 2019 and bears interest at 3.75% above LIBOR-related rates.

· The fourth loan of £3,429,000 (2017: £4,532,000) is repayable in quarterly instalments over the period ending 31 December 2022 and bears interest at 1.75% to 2.75% (depending upon gearing) above LIBOR-related rates.

The subordinated loans were advanced by non-controlling shareholders in Bordeaux Acquisition Limited. They are unsecured, interest free and repayable at the discretion of that company.

Borrowings mature as follows:

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

4. Bank refinance, maturity of borrowings and net cash/(debt) (continued)

A proportion of the Group's bank loans were drawn in foreign currencies to provide a hedge against assets denominated in those currencies. The Sterling equivalent at 31 December 2018 of loans denominated in Euros was £nil (2017: £1,265,000). These amounts are included in the figures above for bank loans, repayable in years one to five.

5. Acquisitions

Increased shareholding in PE.fiberoptics Limited

On 8 August 2018 the Company's interest in its majority owned subsidiary PE.fiberoptics Limited ("PFO") increased from 51% to 67.5%. In 2005, Judges financed the management buy-out of a business manufacturing instruments to test fibre optics. The buy-out vehicle, PFO, was owned by Judges (51%), the seller (14%) with the management of PFO owning the balance of the equity (35%).

PFO purchased half of the shares owned by all shareholders other than Judges, totalling 24.5% of its issued share capital, satisfied by a portion of its surplus cash balances and subsequently cancelled those shares acquired. The total value of the repurchase was £1.5m, based on an enterprise value of £3.8m for 100% of PFO. In 2017, PFO generated £1.1m profit before tax.

2017 acquisition

There have been no amendments to the fair values presented in the 2017 consolidated financial statements. As part of the acquisition of Crystallon Limited ("Crystallon"), an earn-out was payable if Crystallon's adjusted EBITA in the financial year ended 30 November 2017 exceeded £0.899 million, payable at five times such excess, capped at £1.576 million. Crystallon achieved an earn-out of £599,000, which was paid in March 2018. This had already been accrued in the 2017 financial statements.

NOTES TO THE FINAL RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

6. Dividends

The Directors will propose a final dividend of 28.0p per share, amounting to £1,735,000, for payment on 5 July 2019. 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.

Dividends declared by subsidiaries that are not wholly owned are paid to the non-controlling interest in the period in which they are declared and amounted to £162,000 in the year (2017: £nil).

7. Final Results Announcement

This final results announcement, which has been agreed with the auditors, was approved by the Board of Directors on 18 March 2019. It is not the Group's statutory accounts. Copies of the Group's audited statutory accounts for the year ended 31 December 2018 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 2018 and 31 December 2017 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 2017 have been delivered to the Registrar of Companies, but the 31 December 2018 accounts have not yet been filed.