Annual Report and Accounts 2006
Judges Capital plc
Company Information
Directors
The Hon. Alexander Robert Hambro (Non-Executive Chairman)
David Elie Cicurel (Chief Executive)
Ralph Leslie Cohen (Finance Director)
Ralph Julian Elman (Non-Executive Director)
Glynn Carl Reece (Non-Executive Director)
Company Secretary
Ralph Leslie Cohen
Registered Office
Unit 19, Charlwoods Road
East Grinstead
West Sussex RH19 2HL
Registrar
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire HD8 0LA
Nominated Adviser
Shore Capital and Corporate Ltd
Bond Street House
14 Clifford Street
London W1S 4JU
Stockbroker
Shore Capital Stockbrokers Ltd
Bond Street House
14 Clifford Street
London W1S 4JU
Auditor
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
8 West Walk
Leicester LE1 7NH
Principal Bankers
Bank of Scotland
55 Temple Row
Birmingham B2 5LS
Solicitors
Faegre & Benson LLP
7 Pilgrim Street
London EC4V 6LB
Registered in England and Wales, Company No. 4597315
Contents
Trading Activities
Chairman’s Statement
Directors' Report
Report of the Independent Auditor
Consolidated Profit and Loss Account
Balance Sheets
Consolidated Cash Flow Statement
Notes to the Consolidated Cash Flow Statement
Page
2
3 – 4
5 – 7
8
9
10
11
12
Other Notes to the Financial Statements
13 – 21
Notice of Annual General Meeting
Form of Proxy
22 – 23
23
Trading Activities
PE.fiberoptics
PE.fiberoptics is a leading provider to the telecommunications industry
of a wide range of specialised equipment designed to test the properties
of fibre optic and fibre optic networks. Superior technology, design and
manufacture serve to ensure that its innovative products play a vital
role in resolving fibre characterisation and network problems quickly
and efficiently.
Recognised for its award winning products, PFO provides customers
with equipment that will respond to and resolve the day-to-day
challenges experienced in both optical network applications and
quality assurance laboratories. Such products include the
CHROMOS11-CL-PMD, a unique portable optical analyser which has
performed over a world record distance of 15,500 km on a
US-Europe-US submarine link involving hundreds of optical amplifiers.
UHV Design
UHV Design specialises in the development and manufacture of
instruments used to create motion, heating and cooling within ultra
high vacuum chambers where pressure is several trillion times less
than the atmosphere. Designs include the patented MagiGear rotary
feedthrough, which enables rotary motion to be transferred into a
vacuum system utilising magnetic technology. Complex customised
assemblies are also designed and manufactured, tailored to meet
customers’ specific requirements.
The company’s dedication to innovation and quality has established
UHV Design as a major force in its field on a worldwide basis, with
overseas markets currently accounting for more than 70% of sales.
End-users include academic and research establishments (both public
and private sector) and industrial enterprises in sectors such as
semiconductors, aerospace, defence and nanotechnology.
PFO’s customers include manufacturers of fibre, cable and
telecommunications equipment together with network operators.
Exports currently account for more than 90% of sales.
Website: www.uhvdesign.com
Website: www.pefiberoptics.com
Fire Testing Technology
Established in 1989 and strongly focused on the global export market,
FTT has become the world’s leading producer of fire testing
instrumentation. With a portfolio of more than 35 instruments, FTT
possesses an unrivalled product range and has supplied numerous fire
research institutions and testing laboratories. The company’s scientists
are recognised authorities on fire testing issues and, as such, are
members of national and international Fire and Safety Standards
Committees.
FTT designs and assembles its product range at its base in East
Grinstead, Sussex. Instruments include the Cone Calorimeter, which
measures specific fire properties of materials such as rate of heat
release and time to ignition, and the NBS Smoke Density Chamber,
which measures the density of smoke emission from heated materials.
A recent innovation is the Micro Calorimeter, developed in co-operation
with the Federal Aviation Administration, which measures fire properties
pertaining to specimens that weigh no more than a few milligrams.
The principal industries served by FTT are manufacturers of
construction, electro-technical and furnishing products together with
manufacturers of transport systems. With almost all of its output
exported, the company’s products are in everyday use in every
continent, supported by a worldwide network of agents and a team of
service engineers based at the Sussex HQ.
Website: www.fire-testing.com
FTT owns Aitchee Engineering Limited, which makes a variety of
engineering parts and finished products for a variety of industries.
Website: www.aitchee.co.uk
2
Chairman’s Statement
I have much pleasure in reporting your company’s results for 2006, its
first full year as a scientific instruments group. Sales reached £5.2 million
(2005: £2.2 million) while profit before tax but after goodwill amortisation
amounted to £350,000 (2005: £163,000). This resulted in an increase in
earnings per share to 3.9p (2005: 1.6p). Before goodwill amortisation,
pre-tax profit rose from £267,000 to £510,000 and earnings per share
from 5.3p to 9.4p; similarly, on a fully diluted basis, earnings per share
rose from 4.8p to 8.2p. Your Board is delighted to propose a final
dividend of 2p, making a total distribution of 3p for the year.
Constitution of the Group
Judges Capital is the holding company for a group of companies that
specialise in the design and production of scientific instruments.
Operations are all based in the UK but the group is a world player in
certain niche markets, with exports currently representing 86% of
total turnover.
The results include a full year’s contribution from Fire Testing Technology
(“FTT”), the world’s leading manufacturer of instruments designed to test
the reaction of various materials to fire and heat, and from PE fiberoptics
(“PFO”), our 51% owned subsidiary, which specialises in the
production of instruments that test the properties of fibre optic and fibre
optic networks.
During the year two additional businesses were purchased. The
acquisition of UHV Design (“UHV”) was completed in February 2006 and
10 months of trading are included in these accounts. At the beginning of
September 2006, FTT bought the trade of Aitchee Engineering
(“Aitchee”), the contribution in this instance being four months.
UHV designs and manufactures instruments capable of manipulating
objects in ultra high vacuum chambers. The £836,000 purchase price
comprised £650,000 in cash, 98,522 Ordinary shares in Judges and an
£86,000 earn-out; in addition a £205,000 cash payment was made to
reflect excess working capital at completion. The cash element of the
purchase price was financed by an extension of the company’s senior
term loan.
3
The business of Aitchee, which manufactures engineering parts and is
one of FTT’s principal sub-contractors, was acquired by FTT for a
maximum consideration of £230,000. FTT is the company’s
largest customer.
Trading
After a strong start to 2006, both FTT and PFO experienced a slow-down
in orders towards the summer. This trading pattern proved relatively
short-lived and the second half of the year ended favourably on the back
of a solid recovery in the order book. UHV experienced strong growth
throughout the year and Aitchee performed well during the four months
following its purchase.
All operations have shown flexibility and resilience and have produced
significant profits and cash-flows.
Financial Performance
In addition to the strong profits performance referred to above, net cash
inflow from operating activities (before interest and tax) nearly doubled
from £345,000 in 2005 to £614,000 in 2006. Net debt rose from £1.2
million to £2.2 million as a result of acquisitions.
forthcoming Annual General Meeting, on Friday 6 July 2007 to
shareholders on the record on 8 June 2007. The shares will go
ex-dividend on 6 June 2007. The total distribution for the year is 3p,
which is more than three times covered by undiluted adjusted earnings
per share.
Current trading and prospects
The group started 2007 with an improved order book and trading activity
has been satisfactory. Results for the current financial year will benefit
from a full 12 months’ contribution from UHV and Aitchee.
The company is actively looking for new acquisitions in the scientific
instruments sector.
Our recent acquisitions have doubled the average number of employees
within the Judges group and I would like to take this opportunity to thank
them all for their dedication and hard work which was integral to our
achievements during 2006. I would also like to thank our shareholders,
both long-standing and more recent, for their invaluable support.
During the year the company continued to realise the investment portfolio
built up through its former business activity and divested its holding in
Dickinson Legg plc. The book value of the remaining investments has
been reduced to £220,000, almost entirely attributable to the company’s
holding in Poole Investments Plc.
Alex Hambro
Chairman
Date: 22 March 2007
Dividend
After paying a maiden interim dividend of 1p, your Board is delighted to
propose a final dividend of 2p payable, subject to approval at the
4
Directors’ Report
The directors present their report and financial statements for the year
ended 31 December 2006.
Principal activities
The company is the parent of a trading group involved in the design
and manufacture of scientific instruments.
Business review
The company’s business model calls for a steady increase in the scope
of its operations, achieved through acquisitions of companies operating
in its chosen fields of activity and through the ongoing performance of
its established subsidiaries. In addition to the dilution of head office
costs that results from acquisitions, the company closely monitors the
return it derives on the capital invested in its subsidiaries. The annual
rate of return on total invested capital (“ROTIC”) is computed monthly,
both overall and in respect of each subsidiary, by comparing
attributable EBITA with the investment in fixed and net current assets
(excluding surplus cash). In 2006, the overall return computed in this
manner amounted to 21.5% (before taking account of parent
company costs).
• Acquisitions: UHV Design Limited (“UHV”) was acquired in
February 2006 and has significantly out-performed the targets
established at that time. In September 2006, the company’s subsidiary,
Fire Testing Technology Limited (“FTT”), acquired the goodwill and
certain assets of an important supplier of engineering services, Aitchee
Engineering Associates. This acquisition, too, has more than fulfilled
its budgets in the short time since it was acquired. Further information
on both of these acquisitions is set out in the Chairman’s Statement
and in notes 26 and 27 to the financial statements.
• Ongoing performance: the directors regard the trend of
adjusted diluted earnings per share and the company’s ability to pay
dividends to its shareholders as key indicators of overall group
performance. These indicators are monitored closely. In addition to
the above “ROTIC” measure for the rate of return on investments, the
company measures the performance of its individual subsidiaries in a
number of ways:
(a) sales trends: sales at FTT in 2006 were 10% below those in
2005 (the year of handover from the previous owners of the
business), while sales at UHV were 42% above those for 2005,
both measured in 12 month totals irrespective of the dates of
acquisition.
(b) sales order intake: improvements in manufacturing efficiency,
particularly at FTT, have resulted in a reduction in the order
backlog, resulting in a higher degree of sensitivity to the timing
of receipt of orders. The directors regard the rate of order intake
as a more consistent indicator of performance. At FTT, order
intake in 2006 registered a 15% increase compared with 2005;
at UHV, the increase was 43%.
(c) operating profits: as percentages of sales, the group achieved
10.6% in 2006 compared with 5.7% in 2005, reflecting steady
performance by the companies and the dilution of head office
costs as the group grows, as referred to above. In absolute
terms, growth in consolidated operating profits in 2006
amounted to some 330%.
(d) cash generation and management: consolidated gross cashflow
from operating activities amounted to £756,000, of which
£142,000 was reinvested in working capital leaving net cash
inflow from operating activities of £614,000.
• Commercial risks and uncertainties: in general, the
group’s activities are concentrated in niche markets, serving a
worldwide customer base. The principal drivers of the individual
businesses within the group are as follows:
• FTT is the world’s major producer of instruments designed to
measure the reaction of materials to fire; the long-term growth of
the business is supported by the development of related safety
regulations internationally and by the globalisation of trade.
• PE.fiberoptics Limited (“PFO”) is a significant provider to the
telecoms industry and is influenced by the cyclical nature
of this sector.
• UHV is benefiting from the buoyancy of the high-tech markets
which it serves and their requirements for ultra high vacuum
products. The directors consider that there is scope to improve the
company’s output and market share through technical innovation
and increased production capability.
Across all the group’s activities lies the exposure to human resource
shortages. This reflects the small niche-serving nature of the group’s
businesses and the impracticality at this stage of the group’s
development of providing significant back-up support in respect of
key roles.
• Financial risk management objectives and
policies: the group utilises financial instruments, other than
derivatives, comprising borrowings, cash and other liquid
resources and various other items such as trade debtors and
creditors that arise directly from its operations. The main purpose
of these financial instruments is to raise finance for the group's
operations. The main risks arising from the group’s financial
instruments relate to interest rates, liquidity, credit and foreign
currency exposure. The directors review and agree policies for
managing each of these risks, which are summarised below. The
policies have remained unchanged from previous periods, subject
to the implementation in 2006 of a currency hedging strategy as
described below.
5
Interest rate risk
The group finances its operations through a mixture of bank and hire
purchase borrowings (predominantly at floating rates), equity and
retained profits. Exposure to interest rate fluctuations in respect of its
borrowings is not considered to be a major threat to the group.
Liquidity risk
The group seeks to manage liquidity risk by ensuring sufficient
funds are available to meet foreseeable needs and to invest cash
assets safely and profitably. Primarily this is achieved through
loans arranged at group level. Short term flexibility is achieved
through the availability of overdraft facilities and through the
significant cash balances available since the group adopted its new
strategy as an industrial enterprise in 2005.
Credit risk
The group reviews the credit risk relating to its customers by
ensuring wherever possible that it deals with long established
trading partners and agents and government / university backed
bodies, where the risk of default is considered low. Where
considered appropriate, the group insists on up-front payment and
requires letters of credit facilities to be provided.
Currency risk
With exports representing a significant proportion of its sales, the
main risk area to which the group is exposed is that of foreign
currencies (principally US$ and Euros). During 2006, the group
adopted a strategy to hedge against this risk in whole or in part by
maintaining a proportion of the group’s bank loans in these
currencies. The directors review the value of this hedge on a
regular basis. There remains, nevertheless, an ongoing threat to
the group’s competitive position in international markets from any
sustained period of sterling strength.
6
Results and dividends
The results for the financial year to 31 December 2006 are set out on
page 9. The company paid a maiden dividend of 1p per Ordinary share
on 3 November 2006. At the forthcoming Annual General Meeting, the
directors will recommend payment of a final dividend for the year of 2p
per Ordinary share to be paid on Friday 6 July 2007 to shareholders on
the register on Friday 8 June 2007. The shares will go ex-dividend
Wednesday 6 June 2007.
Directors
The following directors have held office during the year:
Hon AR Hambro1 - non-executive
Mr DE Cicurel
Mr RL Cohen
Mr RJ Elman1 - non-executive
Mr GC Reece1 - non-executive
1Member of the audit and remuneration committees
Directors’ interests
The directors' interests in the Ordinary shares of the company were as
stated below:
Ordinary of 5p each
31 December 2006 1 January 2006
Shares
Options
Shares
Options
Details of share options are set out in note 17 to the financial
statements.
In addition to the above holdings of Ordinary shares, the directors had
the following interests in the Convertible Redeemable share capital of
the company:
Convertible Redeemable of 1p each (quarter-paid)
31 December 2006 1 January 2006
Shares
Hon AR Hambro
Mr DE Cicurel*
Mr RL Cohen
Mr RJ Elman
Mr GC Reece
* Held through David Cicurel Securities Limited.
416,667
4,166,667
-
208,333
208,333
Shares
416,667
4,166,667
-
208,333
208,333
The conversion terms of the Convertible Redeemable shares are
detailed in note 18 to the financial statements. Following a full
conversion of the Convertible Redeemable shares to Ordinary shares,
the directors’ interests in the enlarged share capital of the company as
at 31 December 2006 would have been as follows:
Hon AR Hambro
Mr DE Cicurel
Mr RL Cohen
Mr RJ Elman
Mr GC Reece
Ordinary Shares
65,465
931,001
-
40,232
20,232
Hon AR Hambro
Mr DE Cicurel*
Mr RL Cohen
Mr RJ Elman
Mr GC Reece
25,000
526,356
-
20,000
-
-
-
37,000
-
-
-
526,356
-
20,000
-
-
-
-
-
-
*Held through David Cicurel Securities Limited, except for 40 shares held directly.
Payment policy
The group’s policy is to agree terms and conditions with suppliers
before business takes place and to pay agreed invoices in accordance
with the terms of payment. Trade creditor days of the company at the
end of the year represented 34 days (2005: 6 days).
structure of the executive directors’ remuneration and the terms of their
service contracts. The remuneration of the non-executive directors is
determined by the board as a whole. No directors participate in setting
their own pay.
Auditor
Grant Thornton UK LLP offer themselves for reappointment as auditor in
accordance with section 385 of the Companies Act 1985.
On behalf of the board
RL Cohen
Director and Company Secretary
22 March 2007
Directors' responsibilities
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
Company law requires the directors to prepare financial statements for
each financial year which give a true and fair view of the state of affairs of
the group and company and of the profit or loss of the group for that year.
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and explained
in the financial statements;
• prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the group and company will continue
in business.
The directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial position
of the group and company and enable them to ensure that the financial
statements comply with the Companies Act 1985. They are also
responsible for safeguarding the assets of both the group and company
and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
In as far as the directors are aware:
• there is no relevant audit information of which the company's auditor
is unaware, and
• the directors have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to
establish that the company's auditor is aware of that information.
The maintenance and integrity of the Judges Capital website is the
responsibility of the directors: the work carried out by the auditor does
not involve consideration of these matters and, accordingly, the auditor
accepts no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation in
other jurisdictions.
International Financial Reporting Standards
The group is required to issue its financial statements for the year
ending 31st December 2007 in accordance with IFRS, including the
June 2007 interims, in line with mandatory AIM rules. The directors
have started to consider the implications of these requirements, and in
particular which areas of the group’s balance sheet and results would be
significantly affected by the adoption of IFRS. This process has not
been completed to date, but the key areas where differences in treatment
between UK GAAP and IFRS may arise include:
IFRS 3
IAS 12
IAS 39
Business Combinations
Income Taxes (Deferred Tax)
Financial Instruments: Recognition and Measurement
Corporate Governance
The directors have established an audit committee and a remuneration
committee with formally delegated duties and responsibilities. The
members of both committees are the non-executive directors.
The audit committee determines the terms of engagement of the
company’s auditor and, in consultation with the company’s auditor, the
scope of the audit. The audit committee has unrestricted access to the
company’s auditor. The remuneration committee reviews the scale and
7
Report of the Independent Auditor
to the Members of Judges Capital plc
financial statements. The information given in the Directors' Report
includes that specific information presented in the Chairman's
Statement that is cross referred from the Business Review section of the
Directors' Report.
with sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements.
In addition we report to you if, in our opinion, the company has not
kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information
specified by law regarding directors' remuneration and other
transactions is not disclosed.
We read other information contained within the Annual Report and
consider whether it is consistent with the audited parent company
financial statements. The other information comprises only the
Chairman's Statement and the Directors' Report. We consider the
implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements.
Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on
Auditing (UK and Ireland) issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the group's and company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
Opinion
In our opinion
• the financial statements give a true and fair view, in accordance with
United Kingdom Generally Accepted Accounting Practice, of the state
of the group's and the parent company's affairs as at 31 December
2006 and of the group's profit for the year then ended;
• the financial statements have been properly prepared in accordance
with the Companies Act 1985; and
• the information given in the Directors' Report is consistent with the
financial statements.
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
Leicester
22 March 2007
We have audited the group and parent company financial statements
(the “financial statements”) of Judges Capital plc for the year ended
31 December 2006 which comprise the consolidated profit and loss
account, the group and company balance sheets, the consolidated cash
flow statement and associated notes a to c and notes 1 to 28. These
financial statements have been prepared under the accounting policies
set out therein.
This report is made solely to the company’s members, as a body, in
accordance with Section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for
this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
The directors' responsibilities for preparing the Annual Report and the
financial statements in accordance with United Kingdom law and
Accounting Standards (United Kingdom Generally Accepted Accounting
Practice) are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards
on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give
a true and fair view and are properly prepared in accordance with the
Companies Act 1985. We also report to you whether in our opinion the
information given in the Directors' Report is consistent with the
8
Consolidated Profit and Loss Account
Turnover
Operating costs
Goodwill amortisation
Total operating costs
Operating profit
(Loss)/profit on disposal of investments
Net interest payable
Profit on ordinary activities before taxation
Tax on profit on ordinary activities
Profit on ordinary activities after taxation
Minority interests
Profit for the year
Earnings per share
Basic
Diluted
Notes
2
3
5
4
6
19
7
Continuing`
activities`
£`
3,900,477`
(3,546,856)
(105,741)
(3,652,597)
247,880`
2006`
Acquisitions`
£`
1,294,848`
(936,996)
(54,215)
(991,211)
303,637`
Total`
£`
5,195,325`
(4,483,852)
(159,956)
(4,643,808)
551,517`
(6,145)
(195,377)
349,995`
(173,265)
176,730`
(36,440)
140,290`
2005`
£`
2,211,521`
(1,981,776)
(103,750)
(2,085,526)
125,995`
89,842`
(52,632)
163,205`
(100,777)
62,428`
(15,499)
46,929`
3.9p
3.6p
1.6p
1.7p
There are no recognised gains and losses other than the results for the year set out above.
The accompanying notes form an integral part of these financial statements.
9
Balance Sheets
Notes
8
9
10
11
12
13
14
15
16
17
19
19
19
20
2006
2005
Group`
£`
4,430,826`
295,468`
-`
4,726,294`
402,941`
1,249,039`
219,155`
824,156`
2,695,291`
(1,463,239)
1,232,052`
5,958,346`
Company`
£`
-`
-`
5,620,080`
5,620,080`
-`
384,878`
219,155`
218,514`
822,547`
(513,838)
308,709`
5,928,789`
Group`
£`
3,638,059`
114,336`
-`
3,752,395`
413,130`
692,350`
427,911`
1,148,619`
2,682,010`
(1,044,264)
1,637,746`
5,390,141`
Company`
£`
-`
-`
4,579,564`
4,579,564`
-`
145,242`
427,911`
742,337`
1,315,490`
(305,776)
1,009,714`
5,589,278`
(2,835,940)
(2,799,775)
(2,528,959)
(2,528,959)
(43,676)
(51,992)
-`
-`
(23,557)
(15,548)
-`
-`
3,026,738`
3,129,014`
2,822,077`
3,060,319`
178,044`
2,501,430`
475,074`
(127,810)
3,026,738`
178,044`
2,501,430`
-`
449,540`
3,129,014`
173,118`
2,501,430`
380,000`
(232,471)
2,822,077`
173,118`
2,501,430`
-`
385,771`
3,060,319`
Fixed assets
Intangible assets
Tangible assets
Investments in subsidiaries
Current assets
Stocks
Debtors
Investments
Cash in hand and at bank
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due
after more than one year
Provisions for liabilities
Minority interests
Total net assets
Capital and reserves
Called up share capital
Share premium
Merger reserve
Profit and loss account
Shareholders' funds
The accompanying notes form an integral part of these financial statements. The financial statements were approved by the board on 22 March 2007
D.E. Cicurel
Director
10
R.L. Cohen
Director
Consolidated Cash Flow Statement
Notes 2006
£`
613,983`
(195,377)
(294,693)
2005
£`
345,217`
(52,632)
-`
£`
54,462`
(107,094)
(11,704)
-`
(15,681)
(11,704)
Net cash inflow from operating activities
a
Returns on investments and servicing of finance
Interest received
Interest paid
Taxation paid
Capital expenditure
Purchases of fixed assets
Proceeds from sale of fixed assets
Acquisitions and disposals
Investments in subsidiaries
Net cash from purchase of subsidiary undertaking
Net cash outflow before management of
liquid resources and financing
Management of liquid resources
Sales of investments
Equity dividend paid
Net cash outflow before financing
Financing
Issue of Ordinary shares
Expenses paid in connection with share issues
Bank loans drawn down
Loan repayments
Repayments of Contracts for Differences
Net cash inflow from financing
(Decrease)/increase in cash in the year
c
The accompanying notes form an integral part of these financial statements.
£`
32,041`
(227,418)
(31,336)
15,655`
(1,215,090)
178,867`
-`
-`
700,000`
(263,454)
-`
(4,059,564)
579,949`
956,000`
(102,264)
2,448,959`
(164,000)
(451,421)
(1,036,223)
(927,991)
202,611`
(35,629)
(761,009)
436,546`
(324,463)
(3,479,615)
(3,198,734)
1,364,006`
-`
(1,834,728)
2,687,274`
852,546`
11
Notes to the Consolidated Cash Flow Statement
a Reconciliation of operating profit to net cash inflow from operating activities
Operating profit
Depreciation of fixed assets
Amortisation of goodwill
Profit on disposal of fixed assets
Decrease/(increase) in stocks
Exchange differences on foreign currency bank loans
Increase in debtors
Increase in creditors due within one year
Net cash inflow from operating activities
2006`
£`
551,517`
53,644`
159,956`
(2,078)
104,775`
(7,335)
(364,429)
117,933`
613,983`
2005`
£`
125,995`
10,767`
103,750`
-`
(60,880)
-`
(43,247)
208,832`
345,217`
b Analysis of net debt
Net cash:
Cash at bank and in hand
Liquid resources:
Current asset investments
Debt due < one year
Debt due > one year
Hire purchase
Net debt
1 January 2006`
£`
Acquisitions`
£`
Cash flow`
£`
Other movements`
£`
31 December 2006`
£`
1,148,619`
427,911`
(256,000)
(2,528,959)
-`
(2,784,959)
(1,208,429)
-`
-`
(100,000)
(600,000)
-`
(700,000)
(700,000)
(324,463)
-`
824,156`
-`
(48,000)
304,000`
7,454`
263,454`
(61,009)
(208,756)
-`
25,184`
(61,432)
(36,248)
(245,004)
219,155`
(404,000)
(2,799,775)
(53,978)
(3,257,753)
(2,214,442)
Other movements reflect disposals of current asset investments (£208,756), non-cash debt adjustments (£25,184) comprising foreign exchange differences and interest
accrual changes, and the inception of hire purchase obligations.
c Reconciliation of net cash flow to movement in net debt
(Decrease) / increase in cash in the year
Cash flow from decrease in liquid resources
(Loss) / profit on disposal of investments
Amount repaid under Contracts for Differences
New loans entered into, net of repayments
Non cash debt adjustments (2005: issue of loan notes)
Inception of hire purchase obligation
Hire purchase obligation acquired with subsidiary
Movement in net debt in the year
Opening net (debt) / funds
Closing net debt
12
2006`
£`
(324,463)
(202,611)
(6,145)
-`
(436,546)
25,184`
(56,550)
(4,882)
(1,006,013)
(1,208,429)
(2,214,442)
2005`
£`
852,546`
(1,364,006)
89,842`
451,421`
(2,284,959)
(500,000)
-`
-`
(2,755,156)
1,546,727`
(1,208,429)
Notes to the Financial Statements
1 Accounting policies
1.1 Accounting convention
The financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice) and under the historical
cost convention.
The principal accounting policies of the group are set out below.
The policies have remained unchanged from the previous year,
apart from the adoption of FRS 20. This change is described in
more detail below.
Change in accounting policy
In preparing the financial statements for the current year, the
group has adopted the following Financial Reporting Standard:
FRS 20 – Share based payments
The adoption of FRS 20 has resulted in a change in accounting
policy in respect of share options granted since the incorporation
of the company that had not vested prior to 1 January 2006. The
standard requires share-based payments to be recognised at fair
value as an expense commencing in the year of grant. Previously
share-based payments had not been recognised in the profit and
loss account. This change in accounting policy had no material
effect on figures previously reported or on the results for the year.
1.2 Basis of consolidation
The group financial statements consolidate those of the company
and of its subsidiaries, drawn up to a coterminous accounting date.
The results of companies acquired during the year are consolidated
from the date of acquisition. Acquisitions of subsidiaries are dealt
with by the acquisition method of accounting.
The company is entitled to the merger relief offered by section 131
of the Companies Act 1985 in respect of the fair value of the
consideration received in excess of the nominal value of the
equity shares issued in connection with the acquisition of UHV
Design Limited.
The share of net assets of subsidiaries which are not wholly
owned are disclosed as minority interests.
1.3 Goodwill
Goodwill arising on the acquisition of subsidiary companies or of
business undertakings is the difference between the fair value of
the purchase consideration and the fair value of the net assets
acquired. Goodwill is capitalised and amortised on a straight line
basis over its estimated useful economic life up to a maximum of
20 years for acquisitions of subsidiary companies.
Negative goodwill is written back to the profit and loss account to
match the consumption of the non-monetary assets acquired.
1.6 Investment income
Investment income comprises dividends declared during the
accounting period and interest receivable on quoted and unquoted
investments.
1.7 Tangible fixed assets
Fixed assets are stated at cost or at fair value if part of an
acquisition, net of any depreciation and any provision for
impairment. Depreciation is provided at annual rates calculated to
write off the cost or fair value less residual value of each asset
over its expected useful life, within the following ranges:
Plant and machinery:
15% on written down value
to 20% on cost
15% on written down value
to 33% on cost
25% on written down value
to 25% on cost
20% on cost
Fixtures, fittings and equipment:
Motor vehicles:
Building improvements:
1.8 Stocks
1.4 Cashflow statement
Movement of liquid resources relates to net cash cost of current
investments acquired and sold in the year. All current asset
investments are held as liquid resources.
Stocks are stated at the lower of cost and net realisable value or at
fair value if part of an acquisition. Cost includes materials, direct
labour and an attributable proportion of manufacturing overheads
based on normal levels of activity.
1.5 Turnover
1.9 Investments
Revenue recognition policies in respect of the group's principal
revenue streams are as follows:
• Sales of instruments and spares are recognised at the point of
•
despatch.
Installation revenues are deferred and recognised on
completion of installation.
All revenues are stated exclusive of value added tax.
Fixed asset investments in subsidiaries are stated at cost less
provision for impairment. Other investments are treated as current
assets, reflecting the group’s strategic investment policy actively
to pursue appropriate exit routes on all such investments. Current
asset investments are stated at the lower of cost and the directors’
estimate of near-term net realisable value.
13
1.10 Deferred taxation
1.13 Leasing
3 Operating costs
Deferred tax is recognised on all timing differences where the
transactions or events that give the group and the company an
obligation to pay more tax in the future, or a right to pay less tax
in the future, have occurred by the balance sheet date. Deferred
tax assets are recognised when it is more likely than not that they
will be recovered. Deferred tax is not discounted and is measured
using rates of tax that have been enacted or substantively enacted
by the balance sheet date.
Rentals payable under operating leases are charged against
income on a straight line basis over the lease term. Assets held
under finance leases and hire purchase contracts are capitalised
in the balance sheet and depreciated over their estimated useful
economic lives. The interest element of leasing payments
represents a constant proportion of the capital balance
outstanding and is charged to the profit and loss account over
the period of the lease.
1.11 Pensions
1.14 Convertible redeemable shares
Companies in the group operate defined contribution pension
schemes for employees and directors. The assets of the schemes
are held by investment managers separately from those of the
company and group. The annual contributions payable are
charged to the profit and loss account.
1.12 Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the rates of exchange
prevailing at the balance sheet date. Transactions in foreign
currencies are recorded at the rate of exchange prevailing at the
date of transaction. All differences are taken to the profit and
loss account.
In accordance with FRS 4, the convertible redeemable shares
have been recorded as a liability at the net proceeds received and
the future conversion into Ordinary shares has not been taken
into account.
2
Turnover and profit on ordinary activities
before taxation
Turnover and profit on ordinary activities before taxation are
attributable to the group's continuing activities of the design and
manufacture of scientific instruments and undertaking of
investments, as set out on the face of the profit and loss
account. An analysis of turnover by destination for the group
is set out below:
United Kingdom
Europe
United States / Canada
Rest of the World
2006
£
2005
£
710,496
1,731,933
1,075,996
1,676,900
103,416
891,050
475,886
741,169
5,195,325
2,211,521
2006
2006
Continuing Acquisitions
activities
£
Raw materials and consumables1,322,051
906,304
Other external charges
1,246,104
Staff costs
25,102
Depreciation
47,295
Other operating charges
£
297,169
177,997
426,331
28,542
6,957
2006
Total
£
1,619,220
1,084,301
1,672,435
53,644
54,252
2005
Total
£
761,433
573,191
631,371
10,767
5,014
3,546,856
936,996
4,483,852
1,981,776
4
Profit on ordinary activities before taxation
Profit on ordinary activities before taxation is
stated after charging / (crediting):
Loss/(profit) on disposal of investments
Profit on disposal of fixed assets
Fees payable to the company's auditor
2006`
£`
2005`
£`
6,145`
(2,078)
(89,842)
-`
for the audit of the company's annual accounts
12,400`
10,500`
Fees payable to the company's auditor for other services:
for the audit of the company's subsidiaries,
pursuant to legislation
for tax services
for all other services
Depreciation
Goodwill amortisation
Release of negative goodwill
Operating lease rentals - land and buildings
18,320`
7,450`
800`
53,644`
247,519`
(87,563)
162,068`
12,500`
5,650`
2,300`
10,767`
113,050`
(9,300)
62,026`
In addition fees were paid to the auditor in 2006 in respect of corporate finance
transaction work undertaken in connection with the acquisition of UHV Design
Limited. The costs of £28,727 plus VAT were charged to investments in subsidiaries.
14
The group and company have unrelieved tax losses at 31 December 2006 of
£325,259 (2005 £311,000). The group and company have not recognised a
deferred tax asset (2006: £97,578, 2005: £93,300) in respect of these losses as
the timing and extent of recovery is insufficiently certain. These losses are
available to be offset against future profits of the parent company.
Earnings per share
Options and warrants over Ordinary shares and rights of
conversion of the Convertible Redeemable shares are described in
notes 17 and 18.
2006 2005
Basic
Diluted
Basic
Diluted
8
Intangible assets
Group
Cost
1 January 2006
Arising during the year
31 December 2006
Amortisation
1 January 2006
Charge / (credit) for the year
31 December 2006
Goodwill’
Negative’
goodwill’
Total’
£’
£’
£’
3,875,374’
952,723’
(133,565)’
-’
3,741,809’
952,723’
4,828,097’
(133,565)
4,694,532’
113,050’
247,519’
(9,300)
(87,563)
103,750’
159,956’
360,569’
(96,863)
263,706’
140,290
140,290
46,929
46,929
Net book value – 31 December 2006
4,467,528’
(36,702)
4,430,826’
Net book value – 31 December 2005
3,762,324’
(124,265)
3,638,059’
Diluted profit
140,290
156,975
46,929
-
16,685
-
11,744
58,673
Goodwill arose in the year in connection with the acquisition of UHV Design
Limited and of a trade and certain business assets by Aitchee Engineering
Limited, as set out in notes 26 and 27 respectively.
5 Net interest payable
Interest receivable
Interest payable - bank and hire purchase loans
and overdrafts
Interest payable - loan notes
6 Taxation
UK Corporation tax at 30% (2005: 30%)
- current year
- prior years
Deferred tax - origination and reversal of timing
differences:
Current year
Prior years
2006`
£`
2005`
£`
32,041`
54,462`
(194,219)
(33,199)
(87,077)
(20,017)
7
(195,377)
(52,632)
2006`
£`
2005`
£`
160,305`
852`
100,559`
-`
161,157`
100,559`
11,138`
970`
12,108`
218`
-`
218`
Tax on profit on ordinary activities
173,265`
100,777`
Factors affecting the tax charge for the year:
Profit on ordinary activities before taxation
349,995`
163,205`
Profit on ordinary activities before taxation multiplied
by standard rate of UK corporation tax of 30%
Goodwill charges not deductible for tax purposes
Losses carried forward
Provisions and expenditure not deductible for
tax purposes
Marginal relief
Capital allowances in excess of depreciation
Adjustment in respect of prior years
104,998`
67,401`
-`
8,587`
(10,559)
(10,122)
852`
48,961`
33,915`
19,238`
(813)
(524)
(218)
-`
Earnings
Basic: profit for the
financial year
Notional taxed interest
income accruing on dilution
Adjusted:
Add back goodwill charge,
net of £36,051 (2005: £4,557)
relating to tax and minority
interest in negative goodwill
write back
196,007
Adjusted profit - basic / diluted 336,297
Number of shares
Basic: weighted average in year 3,544,953
Adjusted: weighted average
increase on dilution
Earnings per share
Basic / diluted
196,007
352,982
108,307
155,236
108,307
166,980
3,544,953
2,931,101
2,931,101
161,157`
100,559`
Adjusted - basic / diluted
-
718,852
-
513,593
3,544,953
4,263,805
2,931,101
3,444,694
3.9
9.4
3.6
8.2
1.6
5.3
1.7
4.8
15
9 Tangible assets
10 Investments in subsidiaries
11 Stocks
Plant &’
machinery’
Fixtures,’
fittings &’
equipment’
Motor’
vehicles’
Building’
improve-’
ments’
Total’
£’
£’
£’
£’
£’
Group
Cost / deemed cost
1 January 2006
Acquisitions
Additions
Disposals
71,736’
181,143’
72,880’
(26,000)
127,928’
18,369’
12,706’
-’
31,739’
19,450’
2,300’
(14,550)
29,367’
25,125’
-’
-’
260,770’
244,087’
87,886’
(40,550)
31 December 2006 299,759’
159,003’
38,939’
54,492’
552,193’
Depreciation
1 January 2006
Acquisitions
Charge
Disposals
50,039’
61,634’
36,759’
(13,840)
39,017’
6,805’
9,169’
-’
28,011’
7,911’
3,406’
(13,133)
29,367’
7,270’
4,310’
-’
146,434’
83,620’
53,644’
(26,973)
31 December 2006 134,592’
54,991’
26,195’
40,947’
256,725’
Net book value
31 December
2006
Net book value
31 December
2005
165,167’
104,012’
12,744’
13,545’
295,468’
21,697’
88,911’
3,728’
-’
114,336’
Included above are plant & machinery assets held under hire purchase contracts
with a net book value at 31 December 2006 of £68,110 (2005: nil). The
depreciation charge in the year on these assets was £3,440 (2005: nil).
16
Company:
Cost
1 January 2006
Acquisition in year (see note 26)
Adjustment in respect of prior year acquisition
31 December 2006
£`
4,579,564`
1,046,214`
(5,698)
5,620,080`
Raw materials
Work in progress
Finished goods
Group Company
2006
£
288,839
100,646
13,456
2005
£
253,462
159,668
-
402,941
413,130
2006
£
2005
£
-
-
-
-
-
-
-
-
The group’s trading subsidiaries at 31 December 2006, all of which were
incorporated and operate in the United Kingdom, were as follows:
12 Debtors
Company
Principal activity
Class of shares % held
Fire Testing
Technology Limited
Design and assembly
of fire testing instruments
Ordinary £1
100%
PE.fiberoptics Limited Design and assembly
of fibre-optic testing
instruments
“A” Ordinary £1 100% of “A”
class; being
51% of total
equity
UHV Design Limited
Design and manufacture Ordinary £1
of instruments used to
manipulate objects in ultra
high vacuum chambers
100%
Aitchee Engineering Manufacture of
Limited
engineering parts and
finished products
Ordinary £1
100%
All of the above companies are owned directly by Judges Capital plc, with the
exception of Aitchee Engineering Limited, which is owned directly by Fire
Testing Technology Limited (see note 27).
2006
£
1,137,693
-
-
45,680
Group Company
2005
£
559,436
-
-
44,942
2006
£
-
2005
£
-
275,125
106,857
-
111,978
28,853
-
65,666
87,972
2,896
4,411
Trade debtors
Amounts owed by group
companies
Corporation tax - group relief
Other debtors
Prepayments and accrued
income
1,249,039
692,350
384,878
145,242
13 Current asset investments
Group and company
Unquoted investments
Quoted investments
Historical’
cost’
£’
19,373’
199,782’
Market’
valuation’
£’
-’
190,950’
Period end value
Directors'’
valuation’
£’
Total’
valuation’
£’
45,500’
-’
45,500’
190,950’
At 31 December 2006
219,155’
190,950’
45,500’
236,450’
Net unrealised (loss) /
gain at 31 December 2006
-’
(8,832)
26,127’
17,295’
Details of the investments held at 31 December 2006 are: quoted investment -
Poole Investments plc - 5,700,000 shares (representing 3.08%, part of a 13%
concert party); unquoted investments - Fortress Holdings plc (in members'
voluntary liquidation) - 800,100 shares (representing 1.68%).
Historical`
cost`
£`
Market`
valuation`
£`
Period end value
Directors'`
valuation`
£`
Total`
valuation`
£`
19,373`
508,538`
-`
318,825`
45,500`
-`
45,500`
318,825`
(100,000)
-`
-`
-`
Unquoted investments
Quoted investments
Less: provision against
investments
At 31 December 2005
427,911`
318,825`
45,500`
364,325`
Net unrealised (loss) /
gain at 31 December 2005
-`
(89,713)
26,127`
(63,586)
14 Creditors: amounts falling due within one year
2006
£
Trade creditors
339,377
Accruals and deferred income 298,036
Social security and other taxes 101,795
261,718
Corporation tax
Bank loan
404,000
Net obligations under hire
purchase contracts
Other creditors
17,813
40,500
Group Company
2005
£
224,203
111,096
47,073
315,798
256,000
-
90,094
2006
£
43,000
39,970
14,368
-
404,000
-
12,500
2005
£
-
33,284
3,992
-
256,000
-
12,500
1,463,239
1,044,264
513,838
305,776
Other creditors include £12,500 of non equity shares classed as financial
liabilities (see note 18).
15 Creditors: amounts falling due after more than
one year
Bank loan
Subordinated loan notes
Net obligations under hire
purchase contracts
Group Company
2006
£
2005
£
2006
£
2005
£
2,299,775
500,000
2,028,959
500,000
2,299,775
500,000
2,028,959
500,000
36,165
-
-
-
2,835,940
2,528,959
2,799,775
2,528,959
The bank loan is secured on assets of the group, is repayable in quarterly
instalments over a 6 year period ending 31 March 2011 and bears interest at
21/4% above LIBOR-related rates. The subordinated loan notes are unsecured,
repayable on 23 May 2010 and bear interest at Bank of Scotland base rate plus
2%. The hire purchase obligations are secured on the related assets. The
repayment profile of borrowings is as follows:
Bank loan Subordinated
loan notes
£
£
Hire
purchase
£
Total
£
Repayable in less than 1 year 404,000
508,000
Repayable in years 1 to 2
1,791,775
Repayable in years 2 to 5
-
-
500,000
17,813
17,156
19,009
421,813
525,156
2,310,784
16 Provisions for liabilities
Deferred tax – group
1 January 2006
Acquisitions
Charge
31 December 2006
£
23,557
8,011
12,108
43,676
Amounts provided in respect of deferred tax are computed at 30% and relate to
accelerated capital allowances.
17 Equity share capital
(Group and Company)
Authorised
10,000,000 Ordinary shares of 5p each
2006
£
2005
£
500,000
500,000
Allotted, called up and fully paid
3,560,878 (2005: 3,462,356) Ordinary shares of 5p each 178,044
173,118
The increase in 2006 in the number of shares issued amounted to 98,522,
representing shares which were issued on 6 March 2006 at a fair value of £1.015
in respect of the acquisition of UHV Design Limited. The company has taken
advantage of the merger relief available under section 131 of the Companies Act
1985 and recorded the issue of these shares at nominal value.
2,703,775
500,000
53,978
3,257,753
Equity share options and warrants
During the year, a proportion of the group’s bank loans were converted into
foreign currencies to provide a hedge against assets denominated in those
currencies. The sterling equivalent at 31 December 2006 of loans denominated
in US$ was £144,436 and in Euros was £148,229. These amounts are included
in the figures above for bank loans, repayable in years 2 to 5.
Options issued under Employee Share
Option Plans
Options were granted on 20 October 2005 under the company’s
Unapproved Plan at £1.015 per share, exercisable between the
third and tenth anniversaries of grant and conditional on
achievement of group earnings targets, as follows:
• to a director of the company (Mr R.L. Cohen) 37,000 shares
• other 5,000 shares
17
Further options were granted on 22 March 2006 at £1.035 per
share, exercisable between the third and tenth anniversaries of
grant, over 28,000 shares under the company’s Approved Plan
(conditional on achievement of group earnings targets in the case of
10,000 shares) and over 14,000 shares under the Unapproved Plan.
None of these options was granted to directors of the company.
The market price of the company’s Ordinary shares on 31 December
2006 was £0.975, the highest price during 2006 was £1.04 on 3 to
13 January, the lowest price during 2006 was £0.95 on 3 July and
23 September and the price on 15 March 2007 was £1.025.
Warrants to subscribe
Under an agreement dated 22 October 2004, Invex Capital LLP
was granted unquoted warrants to subscribe for Ordinary shares
in the company in connection with the acquisition of Fire Testing
Technology Limited. This warrant has an exercise price of £1 per
share, expires on 23 May 2010 and relates to 133,564 shares.
Convertible Redeemable shares
The conversion rights set out in note 18 would have resulted in
the issue of 485,574 Ordinary shares if conversion of all the
Convertible Redeemable shares had taken place on
31 December 2006.
18 Shares classed as financial liabilities
(Group and Company)
2006
£
2005
£
Authorised
5,000,000 Convertible Redeemable shares of 1p each
50,000
50,000
Allotted, called up and fully paid
5,000,000 Convertible Redeemable shares of 1p each
– quarter paid
12,500
12,500
18
• The holders of the Convertible Redeemable shares are not
Group
In accordance with FRS 25 - Financial Instruments: Disclosure
and Presentation, the preference shares are classified as financial
liabilities and included in other creditors (see note 14).
The principal terms of the Convertible Redeemable shares are as
follows:
• There is no right to participate in the profits of the company.
• On a winding up or other return of capital the surplus assets
remaining after payment of liabilities shall be applied:
i) First in repaying the capital paid up on the Ordinary shares;
ii) Secondly in repaying the capital paid up on the Convertible
Redeemable shares; and
iii) Thirdly distributed amongst the holders of the Ordinary
shares according to the amounts paid up.
entitled to attend or vote at General Meetings of the company
unless the meeting considers a resolution for winding up the
company.
• On payment to the company of the aggregate of (i) a sum equal
to any amount which has not been called or which is otherwise
unpaid in respect of all of the Convertible Redeemable shares to
be converted and (ii) a further sum equal to 95 pence multiplied
by the number of Ordinary shares to be issued as a result of the
conversion less the amount paid up or deemed paid up
(including the amount referred to in (i) above) in respect of the
Convertible Redeemable shares to be converted (“Conversion
Price”), each holder of Convertible Redeemable shares shall be
entitled to convert all or any of his Convertible Redeemable
shares into such number of fully paid Ordinary shares which
represents 0.24 per cent of the number of Ordinary shares in
issue, assuming that all the Convertible Redeemable shares
remaining capable of being convertible into Ordinary shares at
the date of which the conversion takes place had been
converted at the time, for every 100,000 Convertible
Redeemable shares so converted and in proportion for any
greater or lesser number of Convertible Redeemable shares
(“Conversion Rate”).
• The holders of Convertible Redeemable shares shall (subject to
the provisions of the Companies Act) be entitled at any time to
redeem all or any of the Convertible Redeemable shares
outstanding out of any profits or monies of the company which
may lawfully be applied for that purpose.
19 Statement of movements on reserves
Share`
premium`
account`
£`
Merger`
reserve`
£`
380,000`
-`
-`
95,074`
Profit and`
loss`
account`
£`
(232,471)
140,290`
(35,629)
-`
1 January 2006
Profit for the year
Dividend paid in the year
Merger reserve arising on shares issued
2,501,430`
-`
-`
-`
Balance at 31 December 2006
2,501,430`
475,074`
(127,810)
The company paid its maiden dividend of 1p per Ordinary share on
3 November 2006.
The company has taken advantage of the relief available under section 131 of the
Companies Act 1985 and recorded the shares issued in connection with the
acquisition of UHV Design Limited (98,522 shares at a fair value of £1.015 per
5p share) at nominal value.
Company
1 January 2006
Profit for the year
Dividend paid in the year
Share`
premium`
account`
Profit`
and loss`
account`
£`
£`
2,501,430`
-`
-`
385,771`
99,398`
(35,629)
22 Employees
Group
Number of employees - manufacturing
- sales and administration
Balance at 31 December 2006
2,501,430`
449,540`
Employment costs
The parent company has taken advantage of section 230 of the
Companies Act 1985 and has not included its own profit and loss account in
these financial statements. The parent company's profit for the year was
£99,398 (2005: £665,171).
Wages and salaries
Social security costs
Pension costs
20 Reconciliation of movements in shareholders’ funds
2006
no.
25
26
51
2006
£
1,471,845
166,021
34,569
2005
no.
11
11
22
2005
£
560,781
57,284
13,306
1,672,435
631,371
Profit for the year
Dividend paid in the year
Issue of shares
Net addition to shareholders' funds
Opening shareholders' funds
Closing shareholders' funds
21 Directors’ emoluments
2006`
£`
2005`
£`
140,290`
(35,629)
100,000`
46,929`
-`
1,253,736`
204,661`
2,822,077`
1,300,665`
1,521,412`
3,026,738`
2,822,077`
Emoluments
Defined contribution pension scheme contributions
178,660`
3,792`
2006`
£`
2005`
£`
89,110`
-`
During the year one director participated in a defined contribution pension
scheme (2005 nil).
182,452`
89,110`
23 Related Party Transactions
The company entered into the following transactions
during the year with its 51%-owned subsidiary, PE.fiberoptics
Limited (“PFO”):
(a) in January 2006, PFO repaid the outstanding balance of
£25,000 of a loan facility of £250,000 (reducing annually by
£62,500) granted by the company in 2005. No further
drawdowns were made during the year. Interest of £1,702,
calculated at the rate of 7% per annum on outstanding
amounts, was paid by PFO on 2 September 2006. Any
amounts outstanding under this loan facility are secured by
way of a first charge over the assets and undertaking of PFO.
(b) an additional loan to PFO amounting to £40,800 was
outstanding on 1 January and 31 December 2006. This loan
is unsecured, does not bear interest and is repayable at the
discretion of the directors of PFO.
24 Financial Instruments
The group’s policies on treasury management and financial
instruments are given in the Directors’ Report. As permitted by
FRS 13, short-term debtors and creditors have been excluded
from the disclosures below, except as set out in relation to
foreign currencies.
Financial assets
The group’s financial assets comprise cash at bank, which is
principally denominated in sterling and earns interest at floating
rates. There is no difference between the book and fair values of
the financial assets. At 31 December 2006 the group had debtors
denominated in foreign currency as follows: Euros - £197,558
(2005: £155,492) and US Dollars - £294,228 (2005: £91,743)
Financial liabilities
The group's principal financial liabilities are bank debt and the
unsecured loan notes issued in connection with the acquisition of
Fire Testing Technology Limited in 2005. A proportion of the bank
debt is denominated in foreign currencies to provide a hedge
against currency risk on group assets, as described in note 15.
Fair value of financial instruments
Financial instruments include the borrowings above. All financial
instruments denominated in foreign currencies are translated into
sterling at market prices at balance sheet dates. The directors
believe that there is no material difference between the book value
and fair value of such financial instruments.
Borrowing facilities
The group had an undrawn committed overdraft facility of
£500,000 at 31 December 2006 (2005: £500,000).
19
25 Dividends
p/share
2006
£
p/share
2005
£
Paid in the year,
on 3 November 2006
Accrued at the year-end
1.0
-
35,629
-
Proposed after the year-end,
for payment on 6 July 2007
2.0
71,258
-
-
-
-
-
-
26 Acquisition of UHV Design Limited (“UHV”)
On 21 February 2006 the company acquired 100 Ordinary shares
of £1 each in UHV Design Limited (“UHV”), being 100% of its
issued share capital. Goodwill arising on the acquisition of UHV
has been capitalised and the purchase has been accounted for by
the acquisition method of accounting. Advantage has been taken
of Section 131 of the Companies Act 1985 to take merger relief in
respect of the premium on the issue of shares to the vendors of
UHV (see note 17).
UHV drew up statutory accounts for the period from 1 April 2005
to 20 February 2006, the day immediately prior to the acquisition.
These showed turnover of £899,465, operating profit of £321,229,
profit before tax of £326,001, tax of £77,113 and profit after tax of
£248,888. The profit after tax for the year ended 31 March 2005
was £231,742.
20
The assets and liabilities of UHV at the date of acquisition were as
follows:
UHV made the following contributions to, and utilisations of,
group cash flow:
Fixed assets
Current assets
Current liabilities
Long term liabilities
Total net assets at date of acquisition
Consideration paid or provided for,
including transaction costs
Goodwill
Consideration satisfied by:
Cash falling due on completion,
including transaction costs
Cash paid subsequently - earn-out
Estimate of cash payable in 2007 – earn-out
- working capital adjustment
Cash consideration paid or provided for
Issue of shares – 98,522 Ordinary 5p
shares at fair value of £1.015 each
Total fair value of consideration
Less: merger relief
Company - cost of investment recorded
Book and`
fair values`
£`
127,602`
460,713`
(191,797)
(8,011)
388,507`
1,141,288`
752,781`
750,288`
43,000`
205,000`
43,000`
1,041,288`
100,000`
1,141,288`
(95,074)
1,046,214`
Net cash inflow from operating activities
Returns on investment and servicing of finance
Capital expenditure and financial investment
Financing
Increase in cash
Analysis of net outflow of cash in respect of the
purchase of UHV:
2006`
post`
acquisition`
£`
363,294`
3,715`
(61,144)
53,977`
359,842`
£`
Cash at bank and in hand at the date of acquisition
Cash consideration (excluding expected 2007 payment of £43,000)
178,867`
(998,288)
Net cash outflow (excluding expected 2007 payment of £43,000)
(819,421)
27 Acquisition of Aitchee Engineering Limited
(“Aitchee”)
On 4 September 2006 the company’s subsidiary, Fire Testing
Technology Limited (“FTT”), subscribed in cash and at par for 2
ordinary shares of £1 each in Aitchee Engineering Limited
(“Aitchee”), being 100% of its issued share capital. On
commencement of its trade on 4 September 2006, Aitchee
acquired the goodwill and certain assets of Aitchee Engineering
Associates, a business previously carried on by its proprietors in
the manufacture of a variety of engineering parts and finished
products for a variety of industries. Goodwill arising on the
acquisition of these assets has been capitalised within the
consolidated accounts of Judges Capital plc. The purchase of
Aitchee has been accounted for by the acquisition method of
accounting.
28 Operating lease commitments
At 31 December 2006 the group had annual commitments under
non-cancellable operating leases as follows:
Expiry date:
Land and buildings - between one and five years
- after five years
2006
£
2005
£
164,691
-
93,000
-
Apart from cash raised on subscription for its shares, Aitchee had
no assets or liabilities at the date of acquisition of its shares by
FTT, nor any accumulated profits or losses. The fair values
attributed by the directors of Aitchee to the assets acquired from
Aitchee Engineering Associates were as follows:
Fixed assets
Stocks
Total net assets at date of acquisition
Consideration paid or provided for, including transaction costs
Goodwill
Consideration satisfied by:
Cash falling due on completion, including transaction costs
Estimate of cash payable in 2007 – earn-out and transaction costs
Total fair value of consideration
Aitchee made the following contributions to, and utilisations of,
group cash flow:
Net cash inflow from operating activities
Returns on investment and servicing of finance
Increase in cash
Fair values`
£`
32,865`
5,000`
37,865`
243,500`
205,635`
222,500`
21,000`
243,500`
2006`
post`
acquisition`
£`
4,415`
(63)
4,352`
Analysis of net outflow of cash in respect of the purchase of Aitchee:
Cash consideration for shares
Net cash outflow
£`
2`
2`
21
Notice of Annual General Meeting
Notice is hereby given that the fourth Annual General Meeting of Judges Capital plc
(“the Company”) will be held at 17 Grosvenor Gardens, London SW1W 0BD on
21 May 2007 at 12.00 noon for the purpose of dealing with the following business
of which items 6, 7 and 8 are special business.
Ordinary Business
1
To receive the reports of the directors and the auditor and the audited financial
statements of the Company for the year ended 31 December 2006.
To re-appoint Hon Alexander Hambro, who retires by rotation, as a director.
To re-appoint Ralph Elman, who retires by rotation, as a director.
agreement or other arrangements as if the authority conferred hereby had not
expired, this authority to replace any previous authority under section 80 of the
Act which is hereby revoked with immediate effect.
That:
Special Resolutions
7
(a) subject to and conditional upon the passing of resolution 6 above, the directors
of the Company be and they are hereby empowered pursuant to section 95(1)
of the Act to allot equity securities (as defined for the purposes of section 95 of
the Act) for cash, pursuant to the authority granted by resolution 6 above, as if
section 89(1) of the Act did not apply to any such allotment, provided that such
power shall be limited to:
To approve a final dividend of 2 pence per Ordinary share.
(i)
To re-appoint Grant Thornton UK LLP as auditor to hold office from the
conclusion of this meeting until the conclusion of the next general meeting at
which financial statements are laid before the Company and to authorise the
directors to fix the remuneration of the auditor.
the allotment of equity securities in connection with a relevant rights issue or
open offer in favour of Ordinary shareholders where the equity securities
attributable to the respective interests of all Ordinary shareholders are
proportionate to the respective numbers of Ordinary Shares held by them on
the record date for such allotment, but subject to such exclusions as the
directors may deem fit to deal with fractional entitlements or problems arising
under the laws of any overseas territory or the requirements of any regulatory
body or stock exchange; and
2
3.
4
5
Special Business
To consider and, if thought fit, to pass the following resolutions, as to the resolution
numbered 6 as an Ordinary Resolution and as to the resolutions numbered 7 and 8
as Special Resolutions:
Ordinary Resolution
6
That the directors of the Company be and are hereby generally and
unconditionally authorised to exercise all the powers of the Company to allot
relevant securities (as defined for the purposes of section 80 of the Companies
Act 1985 (“the Act”) up to an aggregate nominal amount of £178,043 provided
that this authority unless renewed shall expire at the close of the next Annual
General Meeting of the Company, save that the Company may before such
expiry make any offer, agreement or other arrangement which would or might
require relevant securities to be allotted after such expiry and the directors of
the Company may allot the relevant securities in pursuance of such offer,
22
(ii) the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity
securities for cash up to an aggregate nominal amount of £178,043.
(c)
and, unless previously renewed, revoked or varied, such power shall expire at
the close of the next Annual General Meeting of the Company, save that the
Company may before such expiry make an offer, agreement or other
arrangement which would or might require equity securities to be allotted after
such expiry and the directors of the Company may allot equity securities in
pursuance of such offer, agreement or other arrangement as if the power
conferred hereby had not expired;
(b) For the purposes of this resolution:
(i)
"relevant rights issue" means an offer of equity securities open for acceptance
for a period fixed by the directors of the Company to holders on the register on
a fixed record date of Ordinary shares in the Company in proportion (or as
nearly as may be practicable) to their respective holdings but subject in any
case to such exclusions or other arrangements as the directors of the Company
may deem necessary or desirable to deal with fractional entitlements or legal or
practical problems under the laws of, or the requirements of, any recognised
regulatory body or any stock exchange in any territory; and
(ii) the nominal amount of any securities shall be taken to be, in the case of rights
to subscribe for or convert any securities into shares of the Company, the
nominal amount of such shares, which may be allotted pursuant to such rights.
8
(a)
That the Company is hereby generally and unconditionally authorised to make
market purchases (within the meaning of section 163(3) Companies Act 1985)
of Ordinary shares of 5p each in the capital of the Company ("Ordinary
Shares") provided that:-
the maximum number of Ordinary Shares authorised to be acquired is
356,087;
(b) the minimum price which may be paid for each Ordinary Share is 5p (exclusive
of expenses);
the maximum price (exclusive of expenses) which may be paid for each
Ordinary Share is, in respect of a share contracted to be purchased on any day,
an amount equal to 105 per cent of the average of the middle market quotations
of Ordinary Shares taken from the Daily Official List of the London Stock
Exchange for the five business days immediately preceding the day on which
the contract of purchase is made;
(d) this authority will (unless renewed) expire at the conclusion of the next Annual
General Meeting of the Company held after the date on which this resolution is
passed or, if earlier, 18 months after that date; and
the Company may make a contract of purchase of Ordinary Shares under this
authority before this authority expires which will or may be executed wholly or
partly after its expiration.
(e)
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Form of Proxy
for the Annual General Meeting of Judges Capital plc on 21 May 2007 at 12.00 noon at 17 Grosvenor Gardens, London SW1W 0BD
If you are unable to attend the Annual General Meeting, you may appoint a proxy to attend and vote in your place. A proxy need not be a
member of Judges Capital plc. A proxy must vote as you have instructed and cannot vote on a show of hands. If you wish to appoint a proxy other than
the Chairman of the meeting you may do so by crossing out the words ‘Chairman of the meeting’ and writing another proxy’s name and address in the
space provided. You may appoint more than one proxy. Please indicate for each Resolution how you wish your proxy to vote by placing a tick in the
relevant box. If you do not tell your proxy how to vote, your proxy may vote or withhold his/her vote as he/she thinks fit on the Resolutions or any other
business at the meeting (including amendments to Resolutions).
I/We
of
(Block Letters)
appoint the
Chairman of the meeting or
proxy to attend and, on a poll, to vote on my/our behalf at the Annual General Meeting of Judges Capital plc to be held at 12.00 noon on 21 May 2007,
and at any adjournment(s) of that meeting.
as my/our
For
Against
Vote
Withheld
1
2
3
4
5
6
7
8
Approval of Annual Report and Accounts
Re-appointment of Hon Alexander Hambro
Re-appointment of Ralph Elman
Approval of final dividend
Re-appointment of auditor
Authority to allot relevant securities
Authority to disapply pre-emption rights *
Authority to purchase own shares *
*Special resolutions
If this proxy is signed by someone else on your behalf, his/her authority must also be returned with this form. In the case of joint holdings, any one
holder may sign this form. In the case of a corporation, the proxy must be executed under its common seal or under the hand of a duly authorised officer
or attorney. Even if you complete and return this proxy form, you may still attend the meeting and vote in person should you later decide to do so.
Please sign here:
Date:
Please post this form once you have completed it to the address printed overleaf. To be valid, this form must be received no later than 48 hours before
the time fixed for holding the meeting or any adjournment thereof.
Mailing address for Form of Proxy The Company Secretary, Judges Capital plc, Unit 19, Charlwoods Road, East Grinstead, West Sussex RH19 2HL
Mailing address for Form of Proxy
The Company Secretary, Judges Capital plc, Unit 19, Charlwoods Road,
East Grinstead, West Sussex RH19 2HL
Fold here
Judges Capital plc
Judges Capital plc, Unit 19, Charlwoods Road, East Grinstead, West Sussex RH19 2HL
Tel: 01342 323600 Fax: 01342 323608 E-mail: enquiries@judges.uk.com
Website: www.judges.uk.com