Judges Scientific plc

Good afternoon and welcome to the judges scientific investor presentation. Today we are joined by CEO Tim Christage, CFO Brad Ormsby and Group Commercial Director Ian Wilcock. Questions are encouraged throughout this webinar and can be submitted via the Q&A box which is on the panel on the right hand side of your screen. I will now hand over to Tim to begin the presentation.

Thank you very much Lillian, thank you everyone for joining us. So today we're going to take you through our interim results for the six month period ended 30th June 2026. Actually this is one of two announcements that's come out today and so before I start on the interim results the first thing I'm going to do is just mention the other announcement which is regarding our CFO Brad Ormsby. Brad's been with the group for just over 11 years now and he's made a decision to retire from the group and I just wanted to mention a bit about his contribution to the group and the experience that he's brought. So Brad has made a huge impact on the group since joining. He really lives and breathes the judges culture and is amongst his greatest ambassadors. Really grateful for the impact that he's had and how he's developed our financial acumen within the group. and particularly as well for how he's worked so hard to develop such strong relationships both with our colleagues within the group but also with the investment community outside the group He's given us 12 months notice and so he's going to absolutely be around to help in identifying his successor and in the transition process. So I'd like to thank Brad very warmly on behalf of the group for the work that he's done for us and for staying around. I look forward to continuing to work with him over the next 12 months. Brad will say a little bit more during his presentation. Okay, and let's start talking about our entry results. So we can move to the next slide. And the first thing I'll do is say a little bit about what Judges Scientific is, who we are, and our strategy. So Judges Scientific, we are a buy and build group in scientific insurance markets. If I start in the top left hand corner, there's three pillars of our shareholder value, three pillars on which our model is based. Long term drivers. What are the long term drivers? We talk here about long term secular trends in research and scientific techniques. So the ongoing need for measurement and assessment of variables associated with scientific techniques. and scientific processes and that those things in turn find increasing application in commercial and industrial opportunities okay and we see those as very long-term secular drivers the other aspect is a large deal pool so there are many businesses in the world if we think about a typical opportunity for us maybe it's a company which is Founded by someone that used to be in a research lab or used to be in a university. They've identified an opportunity. They've built a successful business. It's key for us obviously that it's a successful business. Maybe they've come to a conclusion over 15 or 20 years or so that it's time for them to move on and find a different home for that business. We think there are many many thousands of opportunities, many thousands of deals like that that are available in the UK and elsewhere in the world. also fundamental to us that the businesses that we acquire have low capital use so we're not looking for businesses that require a huge amount of investment and ongoing investment in capital equipment in manufacturing equipment we're talking about businesses and the key benefit of that is high cash conversion in other words they convert the majority of their profit into cash we need that because we recycle that cash both to pay off debt and to invest in more businesses it's that compounding that generates shareholder value so moving down to the bottom left So the sort of businesses that we acquire, if they are successful, they've got successful by becoming diversified in their customer base. If they're UK based, for example, the UK doesn't own enough of a global market in scientific instruments. to in and of itself make a successful company or a successful customer base. So companies that are successful have clearly developed an ability to export and serve customers around the world and that's a fundamental aspect of what we have to acquire. We don't buy turnarounds, we don't buy startups, we buy successful businesses and the inbuilt of that is that they're already diversified. and the sorts of customer base will include universities industrial customers and other types of research compliance and we did that some examples some typical examples across the group of the types of companies that the types of customers that our businesses have If I move to the top right, what is our growth strategy? Well, I mentioned earlier, the companies that we acquire generate cash. Low capital use, high cash conversion. They generate cash. We then recycle that cash. We turn that cash into investments in new acquisitions, which includes paying down the debt for those acquisitions. We turn that cash into investments in organic growth, so investments into the existing portfolio. And we turn that cash into a progressive dividend policy to benefit our shareholders. Again those are the mechanisms through which we generate shareholder value. and the execution of our strategy over the last three years has been up to the end of the last financial year 25 acquisitions total dividend distributions of nearly 10 times the admission price back into 2005. 19% CAGR of total revenue 7% CAGR organic revenue 23% CAGR of total EBIT 8% CAGR organic EBIT Next slide please We're an experienced management team who together bring a broad set of skills from the different experiences that they've had so on the call today myself Brad Olesby who I mentioned earlier also Ian Wilcock our group commercial director over the last couple of years we've added into the team Rick Armitage is a group acquisitions executive and John Dunn as portfolio chief executive. Together we bring various experiences on companies like Halma, Oxford Instruments, Danaher and Renishaw. Our next slide please So I'm going to start this next section by giving an overview of our performance in H1 and the key messages and key takeaways after which I'll hand over to Brad to take us through some of the more detailed financials. So the headline here challenging market conditions that weighed on our H1 performance but our fundamentals remain intact. So we certainly don't hide behind the fact that we have an exceptionally weak baseline performance. Our revenue was down 21% compared to prior year. That would be 13% on a night-for-night basis if we exclude the geotech coring expedition that happened in the first half last year, which was something that we knew wouldn't reoccur this year, and Brad will talk in more detail about that. but adjusted earnings per share down 72% and we need to be clear here we are a portfolio of high margin businesses so as we'll talk about for sure we took some action on costs but we've never intended to be able to offset the entire declining margin through costs as high margin businesses when there is a declining revenue there is a high flow through and that's why the adjusted earnings per share is down so much we highlight the external headwinds that affected us during the half so coming into the half we mentioned already that there was no coring expedition for geotech which we knew about Also orders and revenue were materially affected by continued uncertainties in US research funding. So we knew this was an aspect which was going to affect us. It started around about the beginning of the second quarter in 2025. It continued through the balance of last year and it's still affecting us now. So in the first half of this year we had two full quarters of having back versus only one quarter of the first half last year. We also continue to see postponement of offshore wind investments. Those started to impact us in the second half of 2025 and continued through the first half of this year. We had initially expected that those might improve a little. Some of the major suppliers, some of the major businesses in that industry, for example, Fubro, have been highlighting in some of their announcements They had expected to see a little bit of improvement from q2 onwards, but in fact that that didn't occur that didn't happen So we didn't see that improvement As well something that we hadn't really foreseen coming in to the half were delays resulting from china's tax exemption processes Now we should be clear this isn't something which is specific to judges this relates to any business including domestic Chinese businesses supplying research or scientific instrumentation into customers in China or to customers in China where those customers might benefit from government funding as part of the purchase they would be normally there will be processes in place where those customers can be exempt from what is essentially a VAT, about 13% or so. And because of the new five year plan in China, several of those processes have been postponed. And the way that we saw that was, orders that were placed with customers then asking for those shipments to be postponed until the tax issues were sorted out and then lastly orders not being placed for future business until those until those issues were resolved against the backdrop of these challenges we highlight ongoing focus on controlling the controls so we continue to take action to reduce costs of underperforming businesses we took almost two million pounds of costs out of underperforming businesses principally related to people costs at the same time we also invested in talent and innovation in other businesses to support recovery and growth in It's an important point that we want to make about us. We're not the type of group that would indiscriminately cut costs purely on the basis of attempting to achieve a short-term outcome, a short-term even number of earnings per share. Both things can be true of us. We took action to control costs that underperformed businesses while simultaneously investing elsewhere to support recovery growth. Related to that was addressing performance. We highlighted in previous presentations that there were some businesses where there were product specific issues or challenges and we're pleased to report that there's been solid progress for those businesses. Software that needed to be developed has been launched, there's been operational improvements, there's been product rationalization, there's been cost reductions, So while we're a little behind the plan that we expected to be at the age of a half, we're confident that by the end of the year there will be demonstrable progress for those businesses. Concentrating growth. So, despite revenue down 21%, 8 of our businesses grew. As Brad will later show you a bridge, that growth was nowhere near enough to offset the decline that we saw elsewhere. But nonetheless, 8 businesses grew in the half, supported by internal growth initiatives, New product development Market development Investments in talent As well as positive market dynamics in industries like semiconductor, vacuum development and some other industrial research markets So note all three of those examples I gave were industrial markets With all that our strategy remains unchanged Disciplined acquisition process Our structured and decentralized organic growth drivers that Ian will talk about later The importance of local definition and execution of market-led growth strategies Each of our businesses responsible for defining their own strategy And continued investment for long-term returns We ended the half with a solid morning look and as we will talk about increasing momentum on order intake 90% cash inversion despite significantly lower profitability and we're recommending a 10% increase in the interim dividend and that's I'm now going to hand over to Brad for the detailed performance review thanks Tim and I think firstly thank you very much for your kind comments

I'm probably going to address this first. You'll be aware that I've made the decision to step down from serving as judges CFO. I just want to say a couple of quick things on that. It's absolutely a very personal decision for me and no reflection whatsoever on the great management team that's at Judges and one who I firmly believe are the right people in place in order to deliver an excellent long-term future for Judges. I've been truly honoured to be able to serve my colleagues and our shareholders over the past more than a decade and I know when I leave I'm going to misjudge it terribly because it is truly a wonderful company. Once my success has been found I will do my very best to ensure they have a really good and proper handover and then I'll take a break and see what comes next. so moving on to results in the next few nights and total revenues down 21% and as Tim touched on before like for like revenues down 13% when you exclude the 2025 geotech quarrying expedition that we knew wasn't going to repeat in the first half this year now 21% revenue drop for a business like ours with high operational leverage results in a two-thirds drop in adjusted operating profits and put simply marginal gains in revenue positively add to profitability and unfortunately in this case a significant decline in revenue really really has profits earnings per share was also significantly affected with adjusted basic earnings per share of only 39 pence. Moving on to order intake, an order intake declined by similar amounts to the like-for-like drop in revenue with order intake 12% down in H1. However Since the end of H1, and I'll talk about this in somewhat more detail in the order intake slide, we're now in a position where life-like order intake, year-to-date, is now almost a parity. The effect or the reason for the 12% proper order intake as Tim touched on earlier was a firstly a full six months of the continuing uncertainties in the US we only had one quarter in the first half last year and it adds to that the delays in the implementation of the China tax exemptions and good reason for why we were down And as Tim touched on, and I think it's an important point to make, the environment is difficult but at the same time we've managed to, in the last few months, really see some improvement. So if you go back to the beginning of the year, and I'll talk about this later, you'll see how things have changed. I think it's a very very important one because it's now a better place where we have good momentum in our order intake for a number of months now. Moving from P&L on to cash generation and the group has a strong track record of turning our profit into cash. We've touched on this before about high cash conversion and whilst we only generated 4.3 million cash from operations it was a cash conversion of 90% in line with historic expectations. we continue to focus on working capital and whilst it did increase in the period and impacting on our adjusted net debt which increased by 3 million and i'll come and talk about this later we remain the strong balance sheet and plenty of heading on our customers and consequently we've also provided for a 10% increase in the interim dividend to 36 pence per share and that's in line with our policy of providing shareholders with progressively increasing dividend returns lastly before I move on a quick comment about the outlook for the rest of the year now He said in July when we gave our trading updates that there were two key things we needed to deliver in order to be able to achieve the numbers in the market. The first one is that we needed to achieve a good level of order intake in line with our expectations for Q3. And as you'll see, and I'll talk through on the order intake slide, that we have done almost all the way through Q3, quite happy with the order intake. Which then leaves us with an improved order book, an improved order outlook, and pretty much the orders we need in order to be able to deliver the full year result. So quite simply, it's a case of execution now. And that will mean to say it's absolutely straightforward and it's certainly not without risk, but it is within our gift. So moving on to the next slide. I've just touched on a couple of things in the performance slide. I did mention beforehand in the summary slide that the group has high operational leverage and the unfortunate consequence in this first half is that we suffer greatly from declining revenue on our profits. And as Tim touched on, we're not a business, and I think he used these words so I'll repeat them, not a business but with indiscriminately cut costs in order to achieve a short-term profit target however importantly um that doesn't mean to say we do not take action where action is appropriate and we've reduced the cost base of those businesses that are underperforming um by 2 million in this first half but at the same time we've continued to invest for future growth and innovation and it's a really really important point because it takes us on to comments on tax for our effective rate of tax we expect for this year to be 18 and that is a consequence of the continued innovation and continued investment in innovation and the side product from wanting to be able to continue to improve our products for our customers in such a lot of our customers is that we're also able to tap into the uk's patent box scheme which is enabling us to reduce our tax rate so a nice side benefit which we expect to continue to benefit as the years pass from our intention to continue to invest in the budget and then lastly for those that are not as familiar with our P&L we do have adjusting items that takes the statutory results the largest of these is the four million non-cash amortization of these tangible assets which we're required to recognize when we acquire businesses so moving to the next slide on order intake which really is our bellwether so first thing most important for me talking through the graph that's on the right hand side of the slide there are three key lines on here red line a black line and green line the red line is our internal sales budget which we set once a year and do not change it's part of our budgeting process don't change unless we have a major acquisition it's our target the black lines are trading 12 months of orders and really what we're looking for from the black line because that's the history historic last year is for the black line to ideally be touching the red line come the end of the year such that we've had sufficient orders which satisfy our internal sales budget and then the green line which is the last four months of orders annualized it's a shorter term measure unsurprisingly a much more jagged line but an important line nonetheless because if that line is tracking the red line then we know that we'll also have good operational capacity so what's happened in the period by the way before we go on to that the end of the graph is pretty much up to date So we're going to start from the beginning of the year and just remind everyone at the year end announcement in early April that we noted that Q1 order intake was down 18% in the first quarter. Not a great start to the year we have to be honest about that. You can see that from the declining black line throughout the first quarter. But as we went into the start of the second quarter order index started to improve and you can see the black line beginning to improve as with the green line as well and so by the time we got to the end of june some improvement but still 12 percent down however that improvement continued as we went into the second half and for the last two and a half months has again continued to improve you can see that through both black and green lines and actually the green line which if you follow to the end of the graph has been at around or a bit above the budget level for at least a month and because this measure is the last four months annualized what that really means is we've had five months of order intake at and around our budgets which means that we've got momentum coming back and you can then see that in the black line as it's working its way up on hopes inextricably towards the red line for our budget So overall this is momentum returning for us. We wouldn't have said anything for two months worth of decent order intake and hence we didn't say anything in July. But after five months I think that's a reasonable period to feel like we've made some improvements and we can see it and consequently how that's giving us greater comfort ease. Now clearly we've been effective as you can see from the geography, effects of China, effects of the continuing uncertainty in the US academic research funding arena and it's knock on effects around the world but we've managed to do this despite no real improvement in those environments. So I'm pleased with our team's doggy determination to be able to bring in extra orders and help improve things. and that gives us a good degree of confidence looking forwards it means that we can have enough orders we wish to satisfy this year's consensus performance but as i said before still have to execute and there is definitely still risk because we have a lot of high value orders and things can go wrong however we're in a good position this year because we've got the orders to be able to deliver but moving on to the next slide and this slide is a profit bridge which reconciles between the 2025 first half and 26th first half profit contributions to the businesses before central costs. Here are the two green blocks at either end of the graph. Reconciling between these you can see the green block of organic growth where eight of our businesses grew during the period. Good performance from them. Ian will add a bit of colour to things that we did in order to be able to achieve this over that period but as Tim touched on before I can say the red line greatly overshadows the green line. A large chunk of that is the consequence of no coring expedition at geotech during the period. but also decline of 13 of our companies and some of which I have to say is the consequence of delayed order intake and it's then subsequent and delivery for customers and I just want to say I've also left very deliberately the acquisitions column in to enable us to remind shareholders that this important part of our strategy is absolutely not on pause moving on to the next slide please I think the year end will give us a clearer picture of progress here. gearing has negatively increased as a consequence of the weaker performance and that really is a mechanical effect on this measurement but you will also see this morning that we have announced a two-year extension to our banking facilities such that they now mature on the 1st of july 2030 instead of 2028 and i want to formally thank our banks and the three banks that we have Lloyds and Santander and HSBC for their continued support which is not unappreciated by anything and then lastly for anyone that's followed the fact that we do have a small defined benefit pension scheme that we've had on our balance sheet for the best part of 11 years August this year saw the group's no longer having responsibility for this defined benefit pension scheme as it was fully bought out such that now all members future pension payments have all been secured and the group no longer has responsibility so moving on to the next slide we turn on total investment capital erotic as quick as a quick reminder for everyone you know in its purest form it's a function of the multiples we pay for the businesses we acquire you can see on the far left hand side of the graph when we acquired FTT our first acquisition we paid close to five times start around 20% and growing erotic thereafter requires improved financial performance and or buying businesses at lower multiples and when you pay higher multiples you can see the cliff edge effect when we acquired GPS and Scientifica which was then very large acquisitions for the group in 2012 and 2013 the cliff edge effect of doing that and likewise when we paid seven times acquire in geotech in 2022 and small acquisitions in fact minimally on Rotic now what happened in a year well the declining performance unfortunately means that Rotic has declined to around 13% and it's clear we have much work to do to return this figure to historic levels and work we will do. So moving on to the next slide. Our Promotion 1, Diversification. Simply put, diversification works for us. Just a couple of things at the moment. One, our focus added to life science semi-con areas and also into industries particularly as a consequence of the continued uncertainty around the academic funding not only in the US but across the world and so good that we're working on that here again we'll touch on a little bit of this in a short while then onto my last slide which hopefully won't be my last slide I'm on financial history and some key statistics about the long-term success of our group Whilst we're going through a prolonged, continuing challenging period for performance, the group has provided shareholders with a long track record of growth and we will return to growth and those key measures Tim touched on at the beginning of Kager's, a revenue growth and a private growth will return to their rightful levels. has grown by at least 10% per annum over the history of the group and we've increased this interim dividend by 10% to 36 pence per share and lastly the group's continued focus on cash generation serves to enable the group to weather challenging market conditions like we've been going through enable us to make the acquisitions we want to be able to make when we want to make them when we're able to make them quickly reduce acquisition debt and continue to farm those progressively increasing dividend returns for shareholders and I'll pass back to Tim now.