For a company that prides itself on a strong buy-and-build strategy, Judges Scientific (JDG) has recently been strangely quiet on the acquisition front. That is particularly puzzling, as in March this year chief executive David Cicurel insisted that the company was in a strong position to take advantage of opportunities after starting 2019 in a net cash position. The balance sheet has been strengthened in the past six months as the company raked in £8.5m of cash from operations, equivalent to 98 per cent of operating profits.
A lack of acquisitions therefore begs the question: has the pool of specialist scientific instrument companies available to buy at a decent price (three to six times adjusted operating profits, according to the company’s website) dried up? If it has, Judges will struggle to maintain the 32 per cent five-year compound annual earnings growth that has helped support a price/earnings ratio of 19 times forward earnings.
Aside from that lingering doubt, the outlook for Judges is positive. Indeed, management said annual pre-tax profits and earnings will be ahead of analyst consensus expectations at £15m and 188.4p, respectively, up 5 per cent and 3 per cent on 2018. The order book contracted slightly in the period, but still exceeds three months of sales and is expected to pick up as the year comes to a close.
| JUDGES SCIENTIFIC (JDG) | ||||
| ORD PRICE: | 3,650p | MARKET VALUE: | £227m | |
| TOUCH: | 3620-3650p | 12-MONTH HIGH: | 3,650p | 2,080p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 580p* | NET CASH: | £7.2m** | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 37.0 | 4.23 | 53.3 | 12.0 |
| 2019 | 40.2 | 6.92 | 90.1 | 15.0 |
| % change | +9 | +63 | +69 | +25 |
| Ex-div: | 03 Oct | |||
| Payment: | 01 Nov | |||
| *Includes intangible assets of £18.6m, or 300p a share **Excludes lease liabilities of £2.6m | ||||
