Judges Scientific PLC
Prelims: A Precision Player Navigating a Blunt Market
By Alex Langton | 19 March 2025
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Judges Scientific has long been a darling of the AIM market, renowned for its disciplined acquisition strategy in the niche world of scientific instruments. But 2024 was not a year of precision-engineered growth. Instead, the company found itself wrestling with weaker demand, acquisition challenges, and China’s ever-predictable unpredictability.
The headline figures tell the story: revenue dipped 1.8% to £133.6 million, with organic sales taking a sharper 7.6% hit. Adjusted operating profit tumbled 20% to £27.9 million, thanks in part to a lack of coring revenue and, more notably, a 33% revenue decline from China and Hong Kong. Investors may have expected a tougher year, but Judges' usual formula—buy, integrate, and optimise—wasn’t enough to offset these headwinds.
Acquisitions: The Growth Engine Stalling
Judges continued its M&A push with three bolt-ons—Luciol, Rockwash, and Magsputter—costing a combined £20.6 million, including potential earn-outs. In theory, these deals should strengthen the portfolio and smooth out sector cyclicality. But in practice, they barely moved the needle. The real issue? Judges are struggling to find targets that are both attractively valued and large enough to make a meaningful impact. With M&A as the core growth driver, this bottleneck is a serious concern.
There’s also the matter of leverage. Adjusted net debt rose to £51.7 million, a notable jump, even as operational cash flow improved to £34.0 million with an impressive 122% cash conversion. The company prudently extended its banking facility to £140 million, giving it firepower for future deals—but in the absence of compelling targets, that powder remains frustratingly dry.
China: The Black Hole in the Order Book
The most striking figure in this report is China’s sharp decline—order intake down 34%, revenue down 33%. This is no small blip; it underscores the region's volatility, which has been a key market for Judges. The company isn't alone in this struggle—numerous UK industrials have faced turbulence similar to China’s post-COVID economic recovery falters. However, given judges’ reliance on high-margin scientific instruments, any prolonged weakness in this market could be an ongoing drag on profitability.
Valuation: Pricey for a Slower-Growing Business?
With shares trading at around 19x earnings, investors must ask whether the premium is justified. Judges have historically commanded a high multiple thanks to their superior return on capital and disciplined capital allocation. However, with organic revenue shrinking and acquisition-led growth slowing, the market may question whether this multiple remains sustainable—especially with debt above £50 million.
Outlook: A Return to Form, or More of the Same?
The company has kicked off 2025 with a coring expedition (a welcome boost) and a strong order book, which should keep performance in line with expectations. But the real questions remain:
Can it find acquisitions that meaningfully move the dial?
Will China stabilise, or is this the new normal?
How much debt is too much?
I haven’t given up on the company yet, even though the share price is some way off my 1070p feature price. Judges remains a well-run business with a proven model. But after a year of sluggish growth and rising debt, investors will want to see more than just financial discipline—they need tangible acceleration. If the right acquisition opportunities don’t surface soon, that 19x multiple may start to feel uncomfortably rich.
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