(JDG) Judges Scientific

28 September 2011

Judges Scientific plc

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

Interim results for the six months ended 30 June 2011

JUDGES SCIENTIFIC REPORTS RECORD HALF-YEAR RESULTS

Highlights*:

·    Record adjusted basic earnings per share of 27.3p, up 21% compared with the 22.5p achieved in H1-2010

·    Interim dividend of 3.3p, up 32% compared with 2.5p in respect of H1-2010; eight times covered by adjusted earnings

·    Record sales of £9.7 million, up 27% compared with £7.6 million in respect of H1‑2010

·    Record adjusted pre-tax profit of £1.774 million, up 21% compared with £1.465 million in respect of H1-2010

·    Acquisition of Deben UK Limited completed in March 2011

·    Adjusted net debt of £3.1 million as at 30 June 2011 (up from £0.8 million as at 31 December 2010, reflecting the £3 million adjusted net cash impact of the Deben acquisition). Adjusted cash balances of £2.7 million as at 30 June 2011

*     Adjusted earnings figures are stated after adding back exceptional items relating to derivative financial instruments, amortisation of intangible assets and acquisition costs expensed. Adjusted cash and net debt figures notionally include acquisition-related payments which had yet to be settled as at the balance sheet date.

Alex Hambro, Chairman of Judges Scientific, commented:

"I am delighted to be in a position once again to announce a record set of interim results. The Group's operations have produced a strong trading outcome, recent acquisitions have performed well and we have successfully completed the acquisition of Deben.

The Group has entered the second half of the financial year with good visibility but your Board is mindful that the renewed stresses within the global financial system may affect some of the drivers of our growth. Nevertheless, trading has remained robust and the Directors are confident that market expectations of trading results for the full year will be met."

For further information, please contact:

David Cicurel - CEO, Judges Scientific: Tel: 01342 323 600

Pascal Keane - Shore Capital & Corporate: Tel: 020 7408 4090

Melvyn Marckus - Cardew Group: Tel: 020 7930 0777

Chairman's Statement

I am delighted to be in a position once again to announce a record set of interim results. Revenues for the six months ended 30 June 2011 rose to £9.7 million compared with £7.6 million in the first half of 2010, an increase of 27%. The businesses which were in the Group's ownership throughout the first half periods of both 2010 and 2011 achieved organic growth of 13%. The balance of the increase was attributable to the acquisition of Sircal Instruments (UK) Limited ("Sircal") in March 2010 and of an indirect 51% interest in Deben UK Limited ("Deben") in March 2011. Deben designs, manufactures and sells devices used to enable or improve the observation of objects under a microscope and this transaction significantly reinforces our presence in microscopy. 

Adjusted profit before tax in the first half of 2011 rose by 21% to £1,774,000 (H1-2010: £1,465,000). The major part of this increase arose from acquisitions; Sircal's performance has been very strong since its integration into the Group's Material Sciences division and Deben has traded in line with management's expectations.

Adjusted basic earnings per share grew 21% to 27.3p (H1-2010: 22.5p). Adjusted diluted earnings per share amounted to 23.4p (H1-2010: 20.9p), reflecting increased dilution due to the impact under IAS 33 of the Company's strengthening average share price from one half-year to the next. The return on total invested capital ("ROTIC") remained stable at 42%, with the strong overall trading performance counter-balancing the usual dampening effects of acquisitions.

The profit and earnings adjustments referred to above have been made in order to eliminate the impact of exceptional charges under IFRS which have little to do with the Group's trading performance. These charges include the £195,000 costs incurred in respect of the acquisition of Deben and two non-cash items, namely the amortisation of intangible assets amounting to £592,000 (H1-2010: £148,000) and the increase in the fair value of the Convertible Redeemable shares of £761,000 (H1-2010: £575,000) resulting from the rise in the Company's Ordinary share price during the period. After inclusion of these IFRS-related charges, profit before tax is reduced to £226,000 (H1-2010: £665,000) and earnings per share to 2.7p basic and 2.6p diluted (H1-2010: 4.3p basic and 4.1p diluted).

Order intake during the six-month period showed organic growth of 2.3%, albeit distributed somewhat unevenly across the Group. The order book at 30 June 2011 represented two and a half months of sales, similar to the level seen at the beginning of the year.

During the period under review, UHV Design Limited received the Queen's Award for Enterprise in recognition of the company's strong export achievements in recent years. Your Board is proud of this well-deserved tribute, which reflects the team's relentless hard work and the high level of their technical competence. The Group has purchased a plot of land with planning permission, adjacent to UHV Design's existing factory in Laughton, East Sussex, which will allow for further expansion of the company's operations.

The balance sheet remains robust with £4.1 million cash and net debt of £1.7 million as at 30 June 2011. After adjusting for acquisition consideration still outstanding at that date, cash amounted to £2.7 million (31 December 2010: £2.5 million) and net debt to £3.1 million (31 December 2010: £0.8 million), reflecting healthy operating cash inflow and the investments in Deben and the Laughton property.

Since the July trading update, signs of weakness in the world economy have worsened and confidence in the global financial system is again stretched to the limit. Although the resilience of our individual operations and the wide diversity of their respective markets have afforded the Group a considerable degree of protection to date, it would appear improbable that our businesses would be fully insulated from a further deterioration in the global economy. Nevertheless, at this stage, trading in the second half has started vigorously.

The Group's policy is to pay a prudent dividend, leaving scope for good visibility of future progression. The Board views the level of cover as sufficient to justify another step increase: an interim dividend of 3.3p (2010: 2.5p) will be paid on Friday 4 November 2011 to shareholders on the register on Friday 7 October 2011. The shares will go ex-dividend on Wednesday 5 October 2011.

The Hon. Alexander Hambro

Chairman

27 September 2011

JUDGES SCIENTIFIC plc

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

There are no items of other comprehensive income for the three periods in question.

The accompanying notes form an integral part of these consolidated financial statements.

JUDGES SCIENTIFIC plc

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

JUDGES SCIENTIFIC plc

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

(continued)

JUDGES SCIENTIFIC plc

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

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

JUDGES SCIENTIFIC plc

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT

JUDGES SCIENTIFIC plc

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1.         Nature of operations

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.

·      Material Sciences Group

·        Fire Testing Technology Limited is the world's major producer of instruments designed to measure the reaction of materials to fire; the activity is supported through the in-house production of engineering parts by its subsidiary company, Aitchee Engineering Limited.  Its other trading subsidiary, Sircal Instruments (UK) Limited, designs, manufactures and sells rare gas purifiers for use in metals analysis.

·        PE.fiberoptics Limited is a significant provider to the telecoms industry of equipment to test the properties of fibre optic and fibre optic networks.

·      Vacuum Group

·        Quorum Technologies Limited designs, manufactures and sells instruments that prepare samples for examination in electron microscopes.

·        UHV Design Limited designs, manufactures and sells instruments to create motion, heating and cooling within ultra high vacuum chambers.

·        Deben UK Limited designs, manufactures and sells devices used to enable or to improve the observation of objects under microscopes.

2.         General information and basis of preparation

The financial information set out in these condensed consolidated interim financial statements for the six months ended 30 June 2011 and the comparative figures for the six months ended 30 June 2010 are unaudited.  They have been prepared taking into account the requirements of IAS 34 Interim Financial Reporting and the AIM Rules.  They do 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 2010, which have been prepared in accordance with IFRS as adopted by the European Union.

The financial information for the year ended 31 December 2010 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 2010 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements are presented in Sterling, which is also the functional currency of the parent company.

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 Unit 19, Charlwoods Road, East Grinstead, West Sussex RH19 2HL.  Its shares are listed on the Alternative Investment Market.

The condensed consolidated interim financial statements have been approved for issue by the Board of Directors on 27 September 2011.

3.         Significant accounting policies

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2010, except for the taxation policy where, for the purposes of the interims, the tax charge on underlying business performance is calculated by reference to the estimated effective rate for the full year.  The adoption of the Improvements to IFRSs 2010 had no impact on the current period financial statements.

The accounting policies have been applied consistently throughout the group for the purposes of preparation of these condensed consolidated interim financial statements.

3.1        Derivative financial instruments

Under the terms of IAS 39 Financial Instruments - Recognition and Measurement, the Convertible Redeemable shares in the company are deemed to represent embedded derivative financial instruments.  As such, it is a requirement that they be fair-valued at each accounting date, with changes in fair-value being recognised through the Statement of Comprehensive Income.  The fair value is calculated by reference to the market price of the company's Ordinary shares and the exercise price.  In accordance with IAS 32 Financial Instruments: Presentation, on conversion the fair value of the Convertible Redeemable shares converted is transferred direct to equity.

4.         Significant events and transactions

Trading activity during the six-month period ended 30 June 2011 remained strong.  Organic growth in revenues of companies which were owned throughout the first half of both 2011 and 2010 amounted to 13%.  This was achieved in part through a 2.3% increase in order intake but also through the partial consumption of order backlogs.

Deben UK Limited was acquired by a 51% subsidiary of the company on 18 March 2011 and has since been trading in line with expectations.  Sircal Instruments (UK) Limited, which was acquired part-way through the first half of 2010 has also continued to trade well.

5.         Additions to and amortisation of intangible assets

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

6.         Earnings per share

Basic earnings per share is calculated on the earnings attributable to Ordinary shareholders divided by the weighted average number of shares in issue during the period.

Diluted earnings per share is calculated on the basic earnings per share, adjusted to allow for the issue of shares on the assumed conversion of all dilutive options and 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.

Reconciliations of the earnings and the weighted average number of shares used in the calculations are set out below:

6.         Earnings per share (continued)

6.         Earnings per share (continued)

7.         Share issue

During the first six months of 2011 the following allotments took place:

·        23,840 shares were issued at 110p per share on the exercise of unquoted warrants to subscribe for Ordinary shares in the company, granted in June 2008 in connection with the share placing conducted in that year.  The mid-market price of the shares at the time of exercise was 485p.

·        82,885 shares were issued at 95p per share on the conversion of 727,026 Convertible Redeemable shares held by a SIPP for the benefit of David Cicurel, the company's Chief Executive Officer.  The mid-market price of the shares at the time of conversion was 477.5p.

Ordinary shares authorised and issued are summarised as follows:

8.         Changes in net debt in the 6 months ended 30 June 2011 were as follows:

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

9.         Acquisition of Deben UK Limited

On 18 March 2011, the company's 51% subsidiary, Bordeaux Acquisition Limited ("Bordeaux") acquired the entire issued share capital of Deben UK Limited ("Deben"), a company based in the UK.  The total cost of acquisition, all of which was paid in cash, includes the components stated below.

The amounts recognised for each class of the acquiree's assets, liabilities and contingent liabilities at the acquisition date are as follows:

The goodwill that arose on the combination can be attributed to Deben's profitability.

The figures described below include interest charges that have been incurred by Bordeaux Acquisition Limited.

The acquisition of Deben resulted in profit after tax attributable to equity holders of the parent company of £68,000 in the 15 weeks from 18 March 2011 to the reporting date.  After amortisation of intangible assets, the contribution to the equity holders of the parent company's results amounted to a loss of £114,000 after tax.

If Deben had been acquired on 1 January 2011, based on pro-forma 2010 results revenue for the group for the period to 30 June 2011 would have increased by £422,000 and profit after tax attributable to equity holders of the parent company would have increased by £48,000 after allowing for interest costs but before charging amortisation of intangible assets (a reduction of £24,000 after charging additional amortisation of intangible assets of £72,000).

10.        Dividends

The company paid an interim dividend of 2.5p per share (£104,506) on 2 November 2010 and a final dividend of 5.0p per share (£210,204) on 2 July 2011, both relating to the financial year ended 31 December 2010.

The company will pay an interim dividend for 2011 of 3.3p per share on 4 November 2011 to shareholders on the register on 7 October 2011.  The shares will go ex-dividend on 5 October 2011.

11.        Distribution of document

Copies of these condensed consolidated interim financial statements will be sent to shareholders and the AIM team and will be available on the company's website at www.judges.uk.com