Take a measured approach to growth
Judges Scientific is a global scientific-instrument company with a strong position in niche markets
The UK is second only to the US when it comes to scientific publications and Britain’s strong position in science supports many scientific-instrument companies. There is a growing global market in this sector owing to steady organic expansion in scientific enquiry and experimentation, with higher education a key growth driver. The market is growing at around 5.5% a year and is set to reach $54.6bn in 2027.
British firms hold leading positions in many niche markets. A good example is Judges Scientific (Aim: JDG), which has built up a substantial business by acquiring topquality smaller companies in two major areas of technology and then expanding these businesses and helping them develop a global presence. The result is a group with a market value of £589m whose sales have jumped by 59% to £113.2m over the last five years.
Judges consists of 19 small companies grouped into two major product divisions – materials sciences and vacuum sciences (mainly ultra-high vacuum, or UHV, systems). Examples from materials sciences are PE Fiberoptics, which manufactures equipment for testing the optical fibres used in long-distance telecommunications, and Fire Testing Technology, the world’s leading supplier of fire-testing instrumentation.
Examples from vacuum sciences include UHV Design, which supplies heating and manipulation equipment for use in UHV systems for materials research, and Korvus Technology, a supplier of systems for coating substances with thin films through UHV. Judges’ customers include universities such as Princeton and Cambridge; major consumer goods and manufacturing companies such as Proctor & Gamble and L’Oreal; research and compliance organisations such as Cern, Geneva and the US National Institutes of Health; and large scientific equipment manufacturers such as ThermoFisher and Nikon.
Successful integration
Judges acquired Geotek in May 2022, the world-leading supplier of non-destructive testing instrumentation for analysing geological drill cores, together with a services business for core-logging and digitisation. This £80m acquisition is the largest Judges has made to date and the board said it would boost earnings in the 2022 financial year. The most recent acquisition was Henniker, a vacuum sciences company, in March 2023 for up to £2.3m.
Judges has a good record of purchasing and integrating acquisitions. Its acquisition criteria favour companies with sustainable sales, profits and cash generation; an established product range; and an international customer profile in a niche world market. Judges has a ‘buy and build’ approach, which means that it uses its experience, expertise and capital to support and expand the businesses it takes over and helps them enter new geographical markets.
The group uses robust financial controls to ensure its businesses continue to grow profitably while investing strongly in research and development (R&D) to ensure the continued competitiveness of their product ranges.
The 2022 annual results showed that materials sciences contributed 53% of turnover, with vacuum sciences comprising 47%. The addition of Geotek raised the materialssciences proportion from 44.6%. Sales are international with only 12% going to the UK, 28% to the rest of Europe, 28% to North America, 12% to China & Hong Kong and 20% to the rest of the world.
Last year pre-tax profits reached £16m on turnover of £113.2m, giving a profitability ratio of 14.1%. Judges also revealed an adjusted operating profit of £30.1m. Net income for the year was £12.8m. Judges raises the dividend by at least 10% per year and the dividend has almost trebled since 2016 to 81p for 2022.