Judges Scientific PLC - FY 2017 Results


Writen by


Judges Scientific (LON:JDG) reported strong full-year 2017 results posting record high revenues, adjusted operating profit, adjusted earnings per share, and dividends. Overall earnings came stronger than expected driven by healthy organic growth as well as contributions from new acquisitions. The company’s priority in delivering returns to shareholders remains unchanged.


Judges posted 25% Y/Y increase in revenues to £71.4m and 52% in adj. operating profit to £10.9m for 2017. Sales growth appeared across the region except the UK where the Brexit uncertainties are affecting research funding. China/Hong Kong and the USA/Canada were among the strongest countries. Organic revenue growth reached 17.7% in 2017 largely driven by strong order intake. Overall organic order intake was stronger than 2016: up 16% Y/Y which includes the recovery at two subsidiaries that suffered from low order intakes in 2016. The revenue growth was healthy at both Materials and Vacuum divisions with respective Y/Y growth of 21% and 28%. Operating profit increased notably at Vacuum division as the group also made some progress with their business with production issues. The organic order book as of January 2018 was 16.6 weeks improved from 14.8 weeks in January 2017. The group’s annual rate of ROTIC improved to 20.6% at the end of 2017 (2016: 15.2%).


While we are convinced with a solid start of 2018 based on a healthy order book, we expect the growth rate should be rather moderate compared to the one seen in 2017. As more than 85% of Judges products are exported, the group greatly benefited from persistent weakness of Sterling in 2017 especially against EUR and USD, the currencies that comprise c.25% and c.60% of total revenue respectively.  While the company is well hedged for FY 2018, further strengthening of Sterling will be less positive. On a longer term outlook however, the Judges business remains resilient. The management expects steady and healthy deal flow albeit erratic, as the fundamental industry growth driver remain unchanged: growing demand on industry optimization and higher education across the globe.


Judges Scientific (LON:JDG) announced a final dividend of 22.0p per share sending a total dividend for the year to 32.0p per share increased by 16.4% from 27.5p for 2016. With dividend cover more than four times adj. earnings per share and decent earnings visibility thanks to solid order book, the management is confident in sustaining its historical dividend growth track record and maintaining at least 10% p.a. dividend growth. The company’s balance sheet remained strong during 2017: with significantly improved operating cash flow, adj. net debt came down and free cash flow turned positive.


Incorporating full-year 2017 earnings, we slightly revised up our earnings. We estimate 11% and 13% growth for revenue and adj. operating profit for 2018 with adj. EPS at 139p. Our DCF (assuming 10-year sales CAGR 7%, Gross cash flow CAGR 8% and perpetual growth rate 2%) and DDM (assuming 10% dividend growth for next 5 years and 7.7% for perpetuity) derived fair values imply upside of c.42% and 18% respectively from current price.



Important – Please read this information: This report has been commissioned by Judges Scientific PLC and prepared and issued by Capital Network for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however, we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Capital Network at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. Capital Network does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Capital Network’s solicitation to effect, or attempt to effect, any transaction in a security. This document is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Capital Network has a restrictive policy relating to personal dealing. Capital Network does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Capital Network may have a position in any or related securities mentioned in this report. Capital Network or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Capital Network within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Capital Network, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication.

Latest Research