Judges Scientific plc (JDG) Earnings Call Transcript & Summary

Welcome to the Judges Scientific interim results webinar. [Operator Instructions]. This webinar is being recorded. I now hand over to David Cicurel, CEO. David, over to you.

Thank you very much, Dan, and thank you, everybody, for listening to our webcast. This is the results for the first half of 2023. And of course, as you can see on the slide, I'm here with Bradley Ormsby, CFO; Mark Lavelle, our COO; and Tim Prestidge who's our Group Business Development Director. So we go good Slide 2, which I will spend quite a lot of time on it because I think it's important. Just to remember that what we do. What we do is we do a buy and build in the scientific instruments market. And we believe there's really 3 reasons why it's a good idea to do that, and we call them the 3 pillars of shareholder value judges. One is long-term drivers. And what are they? Well, the long-term drivers are a long-term and fast growth in university education throughout the world. And we believe that even in development countries like the U.K., there's growth in university education. And just to give an idea of the scale of this, the number of first year students in the U.K. doubled between 2000 and 2019. So imagine what's happening in China, in Indonesia, in Africa and South America. So this is there for the long term. The other long-term driver is that decide everybody in the world to improve what they're doing. We all try to optimize. And of course, if you want to optimize something physical, you have to measure what you're trying to optimize. You can't optimize something you haven't measured and we make the instrument to measure these things. So we do believe that these drivers are very long term and are intresting. The next thing is to start with the third one. If you do a buy and build, you must have deals to do. And when we started Judges in its present form 18 years ago, we checked that we find other deals. And we found that there were 2,000 companies just in the U.K. doing what we do, and we felt that was a good pool of potential deals. And we believe that out of these 2,000, there's probably 100 companies, which need to change hands every year. And of course, we've done 22 acquisitions during that period. So we just need to read the one and also, we're not restricting ourselves to the U.K. The third one is maybe a little bit less obvious. It's no capital use. Why is that important? Because your typical buy and build exercise is it works like this. I'm on a multiple of 20x, you're on a multiple of 10x, I buy you and I've doubled my money. And this is a very legitimate and its' the traditional buy and build model. Our buy and build model is different. We buy a company for say, 5x, so we make 20% of our money. And we pay -- in the past, we've paid more like 3%, 4%. Now we have to pay 8%, but it's a much better arbitrage. But of course, what I've said is I'm talking about multiple of EBIT but EBIT, which is earnings, it doesn't help you to repay the bank. What helps you to repay the bank is cash. So it only works that model if you have good cash conversion. And this comes from having very low capital use, and we -- that's what we have as Brad will explain, we'll show you some figures about this. So this is the strategic basis for Judges and why it creates shareholder value. And I would say that shareholder value is our obsession. We think that, that's what we're paid to produce, although we're very good citizens. And I think we believe well, but our purpose in life is to create shareholder value. How do you execute that strategy, where you have to be a disciplined acquirer by earning sustainable businesses producing sustainable profit and cash flow and pay sensible prices. You have to have also a good reputation as an acquirer. So people decide to sell you their company when they retire. And then you have -- once you buy these companies, you have to make sure they have organic growth, and they're doing well in your ownership. And our model is to leave these companies a lot of autonomy. And this is how we think we optimize the performance, but we'll talk a lot about this a bit later. Can I have the next slide, please? Yes, sorry. So what are our acquisition criteria? Well, we like strong exporters because we try to buy companies which are in world niches and ideally which dominate a well niche. So of course, the U.K. is not a huge country. So most of your sales must be abroad. They need to generate sustainable earnings and cash flow. And we've been paying 3x to 7x EBIT for these companies. And to be a bit more precise, 3 was odd one out because it was in 2009 when everything was cheap. And the 7 is also an odd one out because we bought [indiscernible] and we paid a higher multiple than usual because it was a large company last year. But really, it's usually 4x to 6x. And on average, we've actually -- excluding Geotech, we paid 5x. And we love to bolt0-up to 3x EBITDA. And we've paid historically between 3% and 8% on our debt. And Geotech, of course, was a large deal, and we managed to freeze our interest rate at 5% just after executing this team. So these are a long incubation period. Cystalization is erratic. You have to pursue a lot of deals before you managed to close them. You have to offer a lot of financial certainty for the seller and behave in an honorable way so that they feel safe that once they've shaken your hand they know exactly the deal which -- that you will do. And once we bought the company, we have to reduce debt and reinvest the money in future acquisitions. Next one, please. So this gives you an idea of the acquisition we've done. Some years, as you see, did appear and some years appear many times like 2016. So I was talking about erratic and there you got erratic. And they all have paid different sizes, but we love them all. Next slide, please. Post-acquisition, so we need very good financial controls. These companies are often family-owned and very rich because they've been successful for many years, and they have cash in the bank, and they have everything in their heads. So we need to really teach these companies to work with figures and facts, which they understand well because they usually are very [indiscernible] engineers or scientistists that understand figures. We leave them a great degree of autonomy. We encourage them to seek always excellence and to fight mediocrity and also to focus on the long term because, of course, we buy these companies for the long term. In fact, we've never sold any. So the next slide is the key messages of the first half of this year. We've kept doing -- following our strategy, as we always do, and we think this set is still very good, as good as on the first day we started. We've had solid organic growth and also acquisition growth from predominantly actually from GeoTech, which we only earned 1 month of the previous year. And this was good growth in most regions. We did 2 small deals, which did a very limited contribution to the half year. We've increased the dividend 23% the interim dividend, and we have this policy, which is quite public that we will increase the dividend by at least 10% every year. And we've had -- we've implemented that policy every year in the last 18 years. But in fact, we've paid a compound 23% increase in dividend. And we've segmented the management team with -- at the beginning of the year with 10 prestige that you will need later. The business environment is still unpredictable, although it's much better than been in the past 3 years. We had at least a lot of problems with supply chain, but these are starting to alleviate geopolitical concerns remain high in our mind. And in our mind, that's the main risk, which is suffered by the business. And then the timing of the geotech coring expeditions, which is 1/3 of the Geotech business and Geotech business is 1/3 of the total business. So this is typically a 1-year event and not necessarily a yearly event. And when it happens in the year is depending very much on third parties other than us. So we have to be a bit passive in that matter. And what we've explained in our Chairman's statement is that in 2024, we are anticipating that the coring would take place towards the end of the year, probably November. And as a result of this, any time switching could have a sizable impact on the recognition of the revenue for that campaign. The outlook when we started the second half of the year with a robust order book as high as it's ever been in June. We're expecting a strong second half making more money than the first half because we have a coring expedition in that period so that's a good period. And we're confident of meeting the expectation of the market for the full year. And now we've got to look at a little bit of our performance, and I'll pass on to Brad or Finance Director.

Thanks very much, David. Good afternoon, everyone. Onto the highlights from the last 6 months. And overall, we had a pretty decent set of results in the first half. Although as you'll see a little later in the presentation, not all of our businesses performed quite as well as we'd hoped. So what's happened in the period? Well, total revenue up 32% to GBP 61 million. And that really is a combination of 16.5% organic revenue growth coupled with a full first half contribution from our May 22 acquisition of Geotech. The good organic revenue growth was supported by good organic order intake itself up 14% on the comparative period, and that's helped support the revenue growth together with 2 other things. One, we entered the period with a really strong order book, and that's been maintained throughout the first half and also pleased to say we certainly noticed an alleviation in the global supply chain issues that were causing us some angst last year, although it is also still fair to say that these issues haven't fully received it. As usual, we're charges where we had good organic revenue growth, we tend to have good profit growth and adjusted operating profits are up 41% in the first half to GBP 14.2 million, up from GBP 10.1 million in '22. And adjusted earnings per share is also up 23% to a record GBP 152.8 per share, noting here that the EPS growth is a little subdued compared to the operating profit growth, and that really is a factor of 2 things, really. One is the increase in the U.K.'s headline corporation tax rate and also higher interest. So moving from generating profit to generating cash. We generated more than GBP 11 million cash from operations in the period and a cash conversion of 81%. We've been able to complete 2 acquisitions in the period and also supported from that cash generation to be able to also enter into 2 acquisitions during the period. And further also, we settled the full geotech earn-outs, 50% in shares, 50% in cash. So we finished the period with net debt of GBP 50 million, down from GBP 52 million at the start of the period with a gearing of 1.45. So it means that we have plenty of headroom in our covenants, a continued strong balance sheet position and really in a position where we can support the strategy of the group, which is the buy and build that we've done 2 acquisitions in the period and of course, also providing shareholders with progressively increasing dividend returns, and we've increased the interim dividend to GBP 27 per share. That's an increase of 23%. So all in all, we have a strong balance sheet position. We have good cash flow in good position to be able to face challenges ahead. And if we look forward for the rest of the year, we know that there are still some out there -- what are they will clearly geopolitical situation at the moment remains a concern to us and never fast on the front page of the news, but at the same time, improvements in supply chain, although not fully resolved. And if you look for the knock-on for some of those things, the increased inflation and the increased interest rate is still at a higher level than I think we'd probably like. But standing back from that, we've had good order intake. We have a really, really strong order book. We're expecting a strong H2 and hence why we've stated in the market this morning that we're confident in meeting market expectations. So moving on to the next slide, the performance, talked a lot about the performance already. So just stop on 2 points. One, I just want to touch on tax and our effective tax rate on adjusted earnings is now up to 22% and moving upwards. And that really is a consequence, as I mentioned before, of the increased U.K. headline corporation tax rate, which has gone up to 25% and also us now being a large company for the purposes of the U.K.'s R&D tax credit scheme. The second thing is we do have adjusting items that take us to our statutory results, and they're reasonably big in this period for a couple of reasons. One, we had noncash amortization of the intangible assets that were required to recognize when we acquire businesses. And secondly, there's a very big one-off this year, a GBP 5.5 million charge, which relates to the difference between the market value of the shares we issued to satisfy the element of the geotech earn-outs [indiscernible] public shares and the difference between that market value and the price we'd agreed at the date of the acquisition for issuing the shares. And under IFRS, we're not allowed to adjust the total acquisition consideration. So the consequences we've had to put it through the P&L as a charge. And moving on to our next slide. And talking about order intake as I always do, it's the bellwether of our business. So as always, I will talk through the graph first. And on that usual standard, Roth, we have 3 lines, red line, black line and the green line. Red lines our internal sales budget. We set that once a year as part of our budgeting process towards the end of the year. And that line doesn't move unless we make a substantial acquisition. And the end of the red line and the far end of the graph is the end of June 2023. So measuring against our target, the red line, we have the black line, which is our trailing 12 months of orders the last 12 months history and also the green line which is the last 4 months of orders annualized. Now in this period, we've also added a few more lines because the substantial acquisition of Geotech last year, so we wanted to show both the organic position and with total group. So what can you see on the graph? Well, if you look at the black line, the black line is almost touching the red line, which means that for the last 12 months, we've had orders that are pretty close to this year's sales budget. And if you look at the organic part of that, you can see that the organic trade at 12 months is actually slightly ahead of the organic sales budget. So a good picture, which shows -- it illustrates why you can see the 14% organic order intake increased during the period and why we ended up with 22 weeks of orders at the end of the period. And then since the end of June through to the end of August, we're still 13% up on organics and the order book -- and the organic order book is still 21 weeks. So this, alongside satisfactory inorganic order intake as well, goes and illustrates why we're comfortable in saying we're confident in meeting market expectations for the full year. So on to the next slide. And a profit bridge to help everyone understand a little bit about the evolution of our profit during the period. And what this slide is reconciling is the H1 '22 contribution of the business compared with the H1 '23 contribution of the business, and this is before central costs. They're the 2 big blocks at either end of the slide. So the first block reconciling is that we've had a big organic growth from a number of our businesses. And at the same time, some of our businesses have gone backwards, you see that red block in the middle, about half the size of the growth. So overall, still good organic growth. I certainly personally would like to see that a little bit smaller, but overall, still a good picture. And then the third block is the full first half effect compared to last year of our acquisition in Geotek, and also a modest contribution from the 2 acquisitions during the period. And moving on to the next slide. We briefly touched on balance sheet and cash flows, and we ended the period with GBP 50 million net debt compared with the GBP 52 million net debt at the start of the period. We've made 2 acquisitions in the period of Henke and Boston over and David will talk about those a little bit later. But I also want to touch on another reason why our debt are not quite as low as we hope, and that's because we've had working capital outflows as well, particularly in inventory where we've continued to have 2 reasons really: one, a big chunk of supply chain conservatism and that's making sure we've got sufficient stop to ensure we can build our instruments and satisfy and delight our customers by getting there on time. But as I mentioned before, supply chain issues are not fully over. So we've also got quite a bit of almost completed work in progress or instruments that are nearly done the missing 1 or 2 components. And we have a reasonably high level of those as we're still waiting for some things to come in. So those things together meant working capital has increased. And consequently, we've not generated quite as much cash as we would have liked. And I think just the key thing that sort of reflect on is that historically, before we went into the pandemic, we were looking at working capital on average, which is around 10% of our annual revenue, and it's moved closer to 20% at the end of this period. And it's certainly an important factor for us. Dave talked about this earlier when we're talking about the business model, the importance of turning profit into cash. And whilst we've got cash conversion of 81% it's reasonable, but it's not as good as we like, which we'd expect to be 90-plus percent. So ongoing focus going forward to help us reduce that 20% of annual revenue, closer back towards 10%, but it's not something which you can just click your fingers and restore overnight. So moving on to the next slide. Another key measure for us. We turn on total invested capital, ROTIC. And just a reminder for everyone, it really is a function of the multiples we pay for the businesses we acquire. So we start on the left-hand side of this graph with FTC, where we pay close to 5x and therefore, start just over 20%. And improving ROTIC really requires either improved financial performance of buying businesses at lower multiples or both. And if you look across the graph, you can see a couple of big cliff edges in the middle of the graph, when we acquired GDS and Scientific in 2012 and 2013, respectively, they were big acquisitions for us back then. And then also at the far end of the graph, the similar sort of coverage when we acquired Geotek and smaller acquisitions, really minimally affect ROTIC now. And what happened in the period? Well, we started at 21.3%. We finished at the end of June at 22.8%. So we continue to strive to improve. And Mark and Tim in a little while, will take you through how we go about that in a bit more detail. So moving on to the next slide. [indiscernible] might be ultimate one on diversification. We start on the left-hand side, it's important we -- you can see from that pie chart that there's no one single company that dominates our group. Our business has also manufactured instruments for different end markets. So we're diversified by scientific application. And as you can see for the other 2 charts, there is no one single country or region that overly dominates our group geographically. And you can see from the bottom that that's because we export more than 85% of our revenue and it goes across the world. So moving on to my last slide on financial history and really a summary of the some key financial factors showed the success about our group over the long term. And you can see revenue, profit, earnings per share are all growing strongly over the group's history. In this period, no difference there really with record revenue, record profit and record earnings per share. Dividends have also grown by at least 10% per annum throughout the last 15-plus years of having provided a dividend and our compound growth of the dividend is 23%, which is consistent with the increase we've made to the interim dividend in this period to GBP 27 per share, and we continue to focus on cash flow generation within the group, which really serves to help enable us to reduce our acquisition debt, make room for more acquisitions and fund that growing dividend. And on that note, I think I'll pass back to David to talk about our group's growth strategy.

Thank you very much, Brad. So the next slide shows growth strategy. Of course, that's what we want to do. And the growth drivers now on the slide really is really our growth comes from M&A, buying businesses and organic growth. I think we have to recognize with the time, the passive of time and growing the business, the share of organic growth is likely to become more and more important as an element of total growth. So -- but in the meantime, I'll comment a bit on acquisition, which is the next slide and the one after that. And we did 2 small acquisitions.I'm not going to talk for us about this, but of course, open the question. We bought Henniker, which is involved in deposition. We have quite a few companies involved in deposition. And so we're interested in that is about plasma and about changing the properties of services. It's in [indiscernible]. We -- the total price is GBP 2 million fee, including a potential GBP 0.5 million earnout in the expectation that the company will produce $580,000 of EBIT in the current year. And we have the hope that it will. So we paid 4 times. The next one is Bossa Nova. So it's traits is basically one of the smallest [indiscernible] completed and is very far away in Los Angeles. It's a company producing $400,000 of EBIT. We paid $1.6 million, which again 4x. And the reason we bought a company, which is that far is because it's very complementary with our company diestrong. And both companies make instrument to test the properties of hair. It was very interesting for people who make shampoos and dyes and also equipment to go the hair, for instance, colors and all this and dryers. And -- but ours is the one we already had, which is Dion we've had for 7 years, is about the mechanical properties of hair. So is it easier to bring the hair by pulling on it. And this is about the appearance because they are very good imaging and interpreting and digitalizing the image of locks of hair and so that you could add because it's all about beauty, but it's very difficult to say how do you add beauty to beauty. But they can do that, and it's a very useful for our customers who are understood in making claims that the products are good for people there. So these are 2 companies which are very, very synergistic, and they work hand in hand. And they had a commercial agreement already for a year and it's been very fruitful. So -- but of course, we're also intrested in organic growth, and I'm going to pass on to Mark and Tim to talk about organic growth because what we do to these companies after we bought them is critically important.

Thank you, David, and good afternoon, everybody. I'd like to really just pick a few items out of this quite comprehensive slide, and then Tim is going to come along and pick a few more out and give his angle on things. So I think the first place to start is right in the middle with our autonomous structure. So Judge's model of running the businesses is very, very specific, which is that we believe that autonomy trumps integration and cost cutting. So there are many groups around the world whose strategy is to buy businesses, to crash them all together to have a central production facility, maybe a central finance facility, et cetera, and really remove the autonomy of the businesses. We believe that in the small niche businesses, which are very close to their markets, there is enormous power in having a small HQ usually with R&D, sales, production and finance all in the same place, and that means that they can respond very quickly to market changes. They can tweak products, they can produce it quite quickly and they can ship it out to the market. So the basic autonomy structure is based around that concept that responsiveness to the market, closeness to the market is something you can really only achieve if you leave these businesses broadly autonomous. Now as I say, there are many other groups that have a different view. And if you're somebody that believes strongly in synergy and cost cutting, then Judges is, frankly, not the group for you. We are a player that believes very, very firmly in the power of autonomy. The question then is what do we do to help these businesses when we acquire them. And I think this falls into really 3 or 4 areas. A lot of the businesses that we get or that we buy have been run by a founder for a number of years. And usually, that founder is very knowledgeable about the industry, quite often about the technology, quite often about the customers, but they're not experienced business people. So the sort of things that they have not put in place tend to be good finance structures. So monthly reporting, analysis of data to understand where they're making money and where they're not. Many of these businesses of the smaller businesses are pretty unsophisticated when it comes to profitability. And at the end of the year, the bank balances in the black, they're happy and if it's in the red, they're not and it doesn't go much further than that. We look at producing in the lightest possible way, some basic monthly accounts. We also require them to forecast what they're going to do next month and then deliver to that forecast. We also like them to do a little bit of analysis of what they've achieved and trying to find out what went right and what went wrong and learned from that. In terms of the operational side of the business, my personal belief is there's a lot of assumption that every manufacturing business in the country or the world already runs pretty well. We're all used to seeing these wonderful images of BMW and Mini and Nissan producing fantastic products quickly from these automated factories. The reality is that most factories in Britain and around the world from small businesses are actually operated pretty poorly. And many of them haven't even taken up some of the lean initiatives that would introduced late '70s, early '80s. And therefore, actually, there's some pretty low-hanging fruit in many of these businesses just to get them performing better from an operational point of view. And we are very good at introducing those new ideas and raising the bar on the performance side of things. And maybe the final area that I just wanted to focus on is leadership. And probably this for me is the most important side that many of the people that started these businesses are scientists and technicians, and as I said, they know the customers very well, but they're not experienced at running businesses. And pretty soon, as the business starts to grow, you start struggling with hiring new people if you take an autocratic view. And therefore, somebody that can grow with the business and somebody who can hire great people and let them get on with stuff rather than seeking to micromanage them is really important. So as these businesses grow, the premium is on helping the leaders to evolve and become better leaders with less focus on the technology and more focused on building that senior teams. In some cases, people are near retirement when they sell to us, and therefore, that's less of an issue. But if we're looking to bring new leadership in, we would focus on the leadership aspect. And we've got some great examples where someone with years of experience within an industry has left and someone with no experience in that industry has come along and doubled or quadrupled the size of the business quite quickly. So it's not industry knowledge by itself, which is necessarily the answer to improving many of these businesses. And as I say, we try and develop the leaders we can. But in some cases, it is a question of bringing in some new blood. Those are my main points. So let me pass across to Tim, and he's got a few others that he'd like to or highlight.

Great. Thank you, Mark. So yes, I'm going to highlight a couple of things in the top 2 boxes there and then spend a little bit of time talking about the bottom 2 boxes in particular, the one on the right around strategy and ambition. I think the first thing I'd like to do is just describe within that context of the autonomous management structure, how is it that we go about, if I pick the example of processes for governance and compliance, how is it that we go about making that happen and enforcing that, so to speak, when that might otherwise be seen as a difficult thing to do when you're also wanting to the autonomous structure. We are a listed company. So clearly, we understand there's a legal obligation and a moral obligation to have fully appropriate governance, audit and compliance structure in place. But I think it's fair to say that a lot of the businesses that we acquire or have acquired they're smaller entrepreneurial businesses, small family-run businesses and those types of controls might not have been put in place. They might not be front and center in the mindset. So one way of thinking about it, well, okay, there's a lot of controls that we have to try and implement here. But really, the last thing we want to do is go against that sort of autonomous structure. We don't want to enforce lots of things. So for example, we don't want to have a large head office staff who are leading this governance and compliance and sort of taking responsibility for it off the operating companies. On the other hand, neither do we want to push a large amount of structure and compliance requirements into the companies that then requires them to build out large teams and sort of mismatch their requirements of staff towards covering those sorts of requirements. So as an example, we found the solution here is more around really being very thoughtful and careful around how we construct appropriate, adequate processes and policies and then making sure that they are written in such a way that they are straightforward to implement and that we can cascade the responsibility for implementing those processes or implementing processes to follow those policies down through into the companies. So without requiring them to build huge teams around that. So we certainly leverage resource across the group, across different group companies to help us to do that, but it's all about having adequate and pragmatic policies. And another example, if I get across the operational excellence slide -- the operational excellence ahead, sorry. Mark mentioned earlier that the balance between autonomy and synergy and that the way we see the autonomous model as trumping synergies every time. Maybe an example where some aspect of synergy is useful to us, and it is very much a strength on the design of the group is in the sort of group-wide functional benchmarking. I'd like to describe the group somewhat tongue and cheek. The way that we work is one for all for 1 and everyone for themselves. And the group as a whole excels when all the individual companies individually excel. But the benefit of the group structure, having these independent companies that are separate, but they all have very similar challenges and lots of things in common. We operate in a sort of open book way. So the strength of companies can be discussed and described amongst the group, and we use that in a sort of benchmarking way. So for example, if one company is looking to hire a role that they can ask openly, who's got real strength in this type of function across the group? Or if they're looking to implement, say, a new piece of software or a new control or ERP software or something, they can look to understand what's been done before across the group, and they can use that learning and use that information. So in some sense, I suppose there is a healthy internal competition, but that's a group-wide functional benchmarking around what's the best-in-class that we have internally that is an aspect of how we do sort of value synergy. I'm going to turn now primarily to the strategy and ambition corner. And I just want to describe -- so I mean, Mark and my respective roles, we share a portfolio of the operating companies. And I usually find it easy to describe the role in the first case by saying what it isn't. And what it isn't is Mark and I running the companies. That's absolutely not what we do. So what do we do? Well, the way that I described the goal is to say that firstly and foremostly, we want to ensure that we have absolutely the best talent in place running and leading those companies. So that sort of really highlights the idea of focusing on senior leadership and the senior leadership team and the development programs. We also want to make sure that, that leader that talent leadership is building around itself the strongest possible team that it can, and that's around networking collaboration and a succession planning element. The other things that we then look for are that, that team is building an ambitious but rational strategy. So what I mean by ambition is that it's clearly showing a deliberate intent to grow. So there's a desire to grow well ahead of an underlying industry growth rate, for example. And that clearly demonstrates that the business is wanting to deliberately do something. It's not just going with the flow of the industry. They are planning to actually do something and grow the organization. But it's rational in that it's reasonable, it's sensible and it's based on fact. And we also want to make sure that the team is acting on that strategy. So they're doing something about it with urgency. And so again, it's not our role to write the strategy, but we have assisted in terms of providing a sort of structured strategy process that enables the companies to identify the -- to state their ambition then to identify how they want to try and achieve that ambition and what they're going to do about it. So if we were to sit in front of you today and tell you about our top 100 actions for growing Judges Scientific, obviously, that would sound crazy. But actually a real strength of our model is that when we think about across 20 companies, maybe that's 5 key actions each. Actually, it's totally plausible through this autonomous and through this devolved organization structure, we can be confident that the companies have identified what the key things are that they can do. They're that granular and they are driving specific actions in order to drive towards the ambition that they've stated that they have. Okay, I'm going to hand back to David now. Thank you.

Thank you so much, Mark, and Tim. So the outlook, we're going to repeat something we said before, but we've been conducting our business model, which has been moving how robust it is over and over again with a strong balance sheet, good long-term fundamentals and a total focus on shareholder value. We -- our environment remains a bit uncertain. Well inflation like we have had for many years and high interest rates. The geopolitical environment is as volatile as I've seen BioLife. Sterling is a very competitive currency. It's very good for us because our costs aren't starting most of our revenue isn't. And we have some positive improvement in supply chain. Current trading, well, we've had a robust order intake and sales in a good order book to start the second half. We're expecting a strong second half helped by acoring expedition. And we're really confident that the results for the whole year will meet market expectation. Next one, please. So what's the investment case? Well, all the things we've said, we have a robust business model with discipline. We got lots of targets. We're early by earnings-enhancing companies. We have very good long-term drivers. We have a well-diversified group by geographic scientific application. The management totally obsessed with shareholder value, which is profitability, cash generation, reducing debt and growing the dividend and achieving a higher return on capital. We've grown the dividend above 10% every year for the past, I think it's actually 18 years or 17 years. And the compound growth rate of dividend actually since we started paying it is 23% per annum. And then for those who are not young and our resident in the U.K., the shares are free of inheritance stacks after 2 years of holding them. So that's a very good thing. And I hope it lasts quite a long time. And that being said, we're open for question and answers.

[Operator Instructions] So first question, do you have any recurring revenue? And if so, what sort of percentage?

So we have I'd answer this one myself, is simple. We don't have a lot of recurring revenue because we sell -- largely we sell capital goods and people don't need to buy them every year. So most of it is one-off. We have some recurring revenue in the sense that some of the instruments that we had have parts which need to be renewed. And of course, Geotek has some recurring revenue because 1/3 of its business is services, which are of a recurring nature, apart from that. But it's a small minority of our business.

And are the coring expeditions that Geotek are varying revenues? And if so, what would be the typical order size of the typical range of those varying revenues? And also, how does the revenue recognition for the coring work?

Okay. Well, yes, there's varying revenue, but it's -- they're quite large, as good as several million. And typically, it would be probably between GBP 3 million and GBP 6 million and the recognition, I'm going to pass on the Brad who is an expert in this subject.

Simply for the revenue recognition for the corn contract is a slightly complex version of percentage of completion.

That was very simple.

I could have made it a lot more complicated, I can assure you, but it's the most simple way of explaining it.

Is there any change to the M&A environment following the increase in interest rates?

Yes. I say they should logically be because at this point, say we did, as I've explained, is 8% on our debt. And last year, we rose the Geotek deal at 5%. So GBP 80 million there's a 3% per annum makes a big difference. So logically, it should be. I can't say that I'm seeing the effect of it. But the longer it lasts, the more it will change the environment. I'm convinced of that. But I have no experiment and knowledge that anything has changed in the M&A scene, but things should get cheaper. I would say that just comparatively large deals are more subject to higher interest rates and small deals. Small deals in a nutshell, if you peak all time EBIT, you get 25% on your money and the interest will eat up 7%, 8%, it leaves a lot. But if you pay a 7x like we paid on Geotek, and you pay 8%, you get 50%, you get 8, it leaves you 7, which is a lot less. So we think that logically we should have reduced values mostly for larger deals.

Do you standardize the ERP systems throughout the group. That's one for Mark and Tim.

Okay. So the answer is no, but small manufacturing systems, there are not that many ERP systems, which will run those sensibly at a sensible price. And therefore, no matter how much people look, they end up coming back to 3 or 4 systems, which sort of do the job pretty well. So we like to -- in many ways, we like to give the companies the illusion that they can have whatever they want. In practice, they always come up back to one of the same 4 systems. And of course, the other point is that if there are -- if you've got colleagues around the group who've got one of those systems, it does make implementing it and writing reports for it that much simpler. So there's a sort of pull rather than -- a pull from the companies rather than a push on us, but standardized systems or using one of that short list ends up being just much easier for everybody. In terms of our end of things, we mandate a certain amount of minimum information, which they have to send it to us every month and have provided they can provide that. And it doesn't matter to us what the ERP system may have as long as it works, it's their business.

And are there any lessons or surprises so far from the Geotek deal? And has anything not gone to plan or gone better than you might have imagined.

I would say like -- I mean make no mistake, whenever you buy a company, you get a lot of good and bad surprises because all companies are quite complex. We do feel that is an excellent company. We -- and I can't say we've had on the whole, the -- it's more or less as we expected, but we have some positive things and some negative things. But on average, we're really happy that it's what we were thinking. And so we'd buy it again for the same price, if we could.

Tremendous. What's the restriction on frequency of coring expeditions? Is it demand or is it internal?

Do you want to take this one, Mark?

Yes, certainly. There's actually -- without going into enormous mass of technical detail, the way that most of these coring expeditions happens requires quite a lot of third-party involvement, and there are all sorts of people that need to come together for these projects. And for many of them, there are only 1 or 2 players in the world. Most of these need to ship, and there are really only at the moment, 2 ships that can do this worldwide. And there are other things that need to come together. And you've got weather limitations that differ in different parts of the world. So there are really quite a lot of -- and then the other thing is that although you might expect that this is -- this has a sort of potential future source of revenue would be something that's led by oil companies. Actually, most of it at the moment is led by governments and universities and their budgets are perhaps a little bit less flexible than a commercial company and their timings are a little bit less flexible. So there's quite a lot of constraints on the process, and it would typically be pretty difficult. You might possibly just get 2 in a year. Some years, you'll get none. But David's point that on average, we will see 1 a year is sort of borne out not just by the commercial realities, but also by the availability of all these different elements that have to come together for the project.

Tremendous. And how does the sales process work at Geotek, particularly in relation to securing new service contracts? And have you made any changes to the sales team or sales process? And the question goes on to ask, are you still expecting to sign a new service contract this year? And do you expect the 3 service contracts you've inherited to be renewed?

Mark can I leave it with you again?

My short question is yes. I mean I think we need to be slightly careful about going too far with some of these questions in terms of giving commercially sensitive information out. And what I would say is that all of the Geotek business is concentrated on relatively few players. There are so many -- only so many people in the world who are interested in the services and the products that Geotek produces. So it's not like we have a sales team of 100 scouring the earth for new leads that we've never come across. I've been very impressed with the intimate knowledge that the small and highly focused sales team we have has of the key players in these markets around the world. Sales Director. Well, again, I'm not going to actually name specific companies or countries, but the sales director was on 3 different continents in the last 3 weeks and talking to the key players. So we're very happy with the sales process and the knowledge and relationships we have with it's more than a handful, but it's not hundreds of key players. I'm sure there's something else in the question that I didn't quite cover. Tim was there anything else you'd pick out?

No, it goes rather specifically into some of the contracts. So I think you probably don't want to answer that. Following on, is there any change in the competitive environment from Geotek.

So one of Geotek's great attributes is that it's what -- in the old days used to be called in the IT world, the sort of systems integrator in that what it's really good at is bringing lots of different technologies to bear on an individual project. And therefore, they're not particularly worried about new techniques coming on board because they simply buy them in. So many of their projects involve 7 or 8 different scanners looking at different aspects of their coring samples et cetera. And therefore, what it means is that they're very nimble. And if essentially new technique comes along, they can buy those in, bottom their system and integrate them with the data gathering, which they do. So what I would say is that actually, the data side of things itself has become increasingly important in that world and our ability to gather data from a number of different sensors and integrating display at has become particularly important. So in terms of competitors, there have been new single sensor companies which have appeared, but Geotek's USP, which is the multicenter situation is relatively unchanged.

Tremendous. And all of the questions were really about Geotek. But the rest of the presentations obviously answered all the questions. There's one more that's just come in. What's the percentage split of sales through the different customer types, industrial, universities and other research facilities, et cetera.

Well, I'll answer this one with some difficulty because it's very speculative. But we believe that university is about half of our sales without having any evidence because, of course, it's also sometimes difficult to know where your sales are going. And the good proportion goes also to test houses. And of course, some of them are universities. This is one of the source of our difficulties. But I would say if you talk universities and the research centers maybe 50%, 60% test houses may be 20%, 30% and maybe industries probably again 20%, 30%. But we didn't have proper figures to justify this.

Great. And just a final question. Tim, what has been your insights and learning after 6 months at Judges?

Tim I think this one is for you.

It will be for me that one, yes, I guess. Yes, thank you. I think there's one thing in particular that I'd highlight, and it's come up in a few themes in the presentation so far. And that's the nature of Judges Scientific that's honorable, honest, open, what you see is what you get. It was sort of David's founding ethos for the company, and it's still true to this day, every day. And it's not just talk. It really is reality. And I think a real learning point for me has been an experience for me has been the importance of that to -- not just to the headquarters team, the culture throughout the organization and also the importance of it to prospective acquisitions as well. So when I have met prospective acquisitions and described that as an element of the group, it's always very, very well received. It always seems to be one of the key reasons why they are very keen to work with us. So I think there's a real close tie there with the way that Judges operates and what the potential sort of acquisition pool is looking for as well in the process that ties together really, really well. So that's one of the key learning points for me.

Tremendous. And that's the end of question. David, do you have any closing remarks?

No, I want to thank my colleagues and the 2 of you also. And of course, everybody who attended and bothered to listen to us for all and asking many questions. And we hope to see a better view in 6 months for the final results.

Tremendous, many thanks, David, Brad, Mark and Tim and for everyone who's listening, you'll now be taken to a web page to give feedback on the presentation. If you're unable to complete it now, you'll get a follow-up e-mail. We'd be really grateful if you could take a few minutes to complete. Many thanks for joining. This is the end of the webinar.