Judges Scientific Stock

Good afternoon, and welcome to the Judges Scientific Investor Presentation. Today, we are joined by Tim Prestidge, Chief Executive Officer; Brad Ormsby, Chief Financial Officer; and Ian Wilcock, Group Commercial Director. [Operator Instructions]

I will now hand over to Tim to begin the presentation.

Thank you, Ivy, and welcome, everyone. Thank you for joining and delighted to be leading this, my first retail webinar as CEO. I'm going to start just by saying how the agenda overall will work here and the points that we're going to cover.

So I'm going to give some introductory remarks and talk a little about the highlights from our financial year 2025, the investments that we've made and the key takeaways, talk a little bit about the executive team and our business model. I'm then going to hand over to Brad, who will talk in more detail about the specifics of our performance through 2025. Brad is going to then hand back to myself and my colleague, Ian, to talk through our buy and build -- the fundamentals of our buy and build strategy, acquisitions and the organic growth model, after which we'll talk about some of the fundamentals and finally, some time for Q&A.

So one of the key takeaways that we'll talk about is undoubtedly the financial year '25 -- 2025 has been a disappointing year, but the fundamentals are intact. So in that context, it probably makes sense to have a chat about what are the fundamentals. So what is Judges Scientific and what is our business model? So Ivy, if you can move us to the first slide, please. First slide, please. Next slide.

So Judges Scientific is a buy-and-build group in scientific instrument markets. Sorry if we can go back to Slide 2. If we can go back to Slide 2, please. Thank you.

Judges Scientific is a buy and build group in scientific instrument markets. And the important aspects to realize here are that we are founded on 3 pillars of shareholder value, okay? So the markets in which we play and the businesses that we seek to acquire, all benefit from long-term drivers. So long-term secular drivers or underlying growth drivers. This particularly relates to long-term demand for scientific instrumentation and scientific techniques for academic research and how those techniques in academic research inevitably find their way into commercial applications and industrial applications, both in terms of research and processes.

We also benefit from a large deal pool -- a large potential pool or pool of potential companies available for acquisition. Typically, we might deal with companies that are founder-owned, a founder has led the company for a period of time. Perhaps they've reached a stage where they want to retire. And at that point, they're looking for opportunities for how they can divest the business.

The other pillar of our shareholder value is low capital use. So we specialize and target businesses that are -- that have a foundation of low capital use. So we absolutely want to focus on businesses that are very high return on capital, high cash conversion. And together, that then allows us to generate cash and repay debt. And together, those things have compounded shareholder value.

Moving down the left-hand side, another key aspect of our strategy is we are an extensive and well-diversified customer base globally. So in customers in university, in industry and in other research and compliance roles. But our diversification is broader than that. So we're geographically diverse. Our companies are more than 85% of our revenue is exported. And we're also diversified in the context of the scientific techniques that we invest in. So we are agnostic in our choice of scientific techniques. We have a broad base of capabilities within the group.

Our strategy is a buy and build strategy. People might think of it as serial compounding. So it's based on acquisitions and organic growth. We seek to acquire businesses into the group that meet the criteria. We'll talk a little bit more about that later on, and then to invest in those businesses to amplify their strengths and to help them grow and help them grow in the long term. So we always acquire businesses in the context of holding on to that business forever. We never acquire a business in the context of exiting that business, but we intend to invest in that business and have it become part of our organic growth portfolio.

Through the execution of that strategy over the last 20 years, we've achieved 25 acquisitions, a total dividend distribution of 9.8x the 2005 admission price, 19% CAGR on total revenue, 7% CAGR on organic revenue, 23% CAGR on total EBIT and 8% CAGR on organic EBIT.

Next slide, please. We have an experienced management team, and there's also been some recent additions and investments in our management team. If I go down the right-hand side first, we were joined recently by Rik Armitage as our Group Acquisitions Executive, bolstering and expanding our acquisitions team. I should also say here, with the planned succession, David moved to a nonexecutive chair role, but he also continues to assist us on acquisitions. It was always David's superpower, and it's something that absolutely he wanted to remain involved in, and we wanted him to remain involved in that aspect of what we do. So he remains as part of our acquisitions process, and Rik has further bolstered that.

We also welcomed John Dunne as Portfolio Chief Executive. John joined us from Halma, and he chairs a portfolio of our companies, as does Ian Wilcock, our Group Commercial Director. Mark Lavelle, who stepped down from the plc Board after our AGM last year, remains with the company and is working centrally, particularly focused on operational excellence. And I'm here with my colleague, Brad, as Chief Financial Officer.

Okay. Next slide, please. So I want to highlight here the key aspects and key takeaway messages for our presentation today. We've had a disappointing financial '25 despite a strong start. As mentioned, the fundamentals remain intact. So we had a strong start in Q1. We delivered a Geotek coring contract as expected. That contract was delivered and executed well. That happened in Q1.

We also, in Q1, benefited from strong order intake. However, the situation changed slightly around March, where restrictions in U.S. federal funding started to be introduced. There were really 2 layers to this. The first context was around uncertainty. So there started to be conversations about specific universities and beyond that, specific areas of funding and which projects might be funded or not. And that had an almost immediate impact on us in terms of previously budgeted projects and projects for some discretionary spend being held.

Subsequent to that, we then saw the real impact of funding cuts. And the funding cuts started to be seen in terms of longer-term projects being put on hold or canceled. And really, the restrictions in U.S. federal funding is the key and material impact for our 2025. We saw a significant downturn in orders in Q2 and Q3.

Beyond this, though, we did see some geographic and market diversification that partly mitigated the U.S. impact. We saw some growth in Asia. We saw some growth in parts of Europe. And we also saw where there was resilience across the group, it was with those companies that had some exposure to industrial applications. We'll talk a little bit more about that later on. And also those companies that had delivered new products recently.

That really focuses us on where we can make a difference. We are very mindful that there are certain things like the U.S.' approach to federal funding or the geopolitical climate that we cannot influence. But we can focus on controlling the controllables. And by controlling what best what we can control, we better navigate those things that we can't control.

So the things that we want to highlight are investing for growth in talent, investing in innovation, operational capacity and operational improvements and working directly with those companies who are experiencing some product-specific and product line challenges.

We also, as I mentioned in our previous slide, invested in management team and the planned succession, with Rik joining us, with John joining us and with David's move to Nonexec Chair and my appointment.

The key takeaway is that despite it being a challenging year, a disappointing year, and despite this being the second successive year of disappointing results, the underlying fundamentals remain intact. We have a portfolio of strong, exporting companies in global niches that maintain solid margins. Our overall margin just below 20% was perhaps a little disappointing by our own measures, but it's still a solid result. We have robust cash conversion, enabling a rapid repayment of debt and a 10% increase in dividend.

I'd also reconfirm that our strategy remains unchanged. We have confidence in our long-term demand drivers. The long-term requirement for scientific instrumentation and scientific techniques in academic research, shifting into commercial and industrial applications, we believe, remain solid. We are committed to our disciplined acquisition process, and we are committed to our structured and decentralized organic growth methodology, all of which we'll talk about more later.

Next slide, please. I'm now going to hand over to Brad, who will take us through our performance review.

Thank you, Tim, and hello, everyone. If you can move to the next slide, please. Let me take you through the results for the past year. And as Tim has already touched on, it's disappointing for us, again, that we've had challenging and difficult trading results. We started the year quite well. The Geotek coring expedition, we had a solid order book, gave us confidence for the year. And then unfortunately, the effect of the U.S. academic research funding cuts a bit and it progressively degraded our performance throughout the rest of the year.

So let's look at the results and total revenues up 9% to GBP 146 million. This is a combination of total organic revenue growth of 6%, plus a full year contribution of our 2024 acquisitions.

Going back into the organic revenue growth for a moment, on a like-for-like basis, and that's if you strip out the coring expedition, which we did -- which we had in '25 but didn't have in '24, then like-for-like organic revenue growth was only 2%. And behind that was a drop in order intake, which was disappointing for us.

We started -- as we said, we started the year quite well and Q1 was quite a good quarter for us, but then ongoing decline afterwards. So overall, adjusted operating profits were flat at GBP 28 million, an effect -- positive supportive -- positive support from that from the Geotek coring expedition and in fairness to Geotek as a whole, a good recovery from the whole business.

But if you strip Geotek out from these results, the rest of our organic businesses went back by 1/3, which was a disappointment, and we'll see this illustrated a bit better in my bridge later.

We moved from profits to cash generation. The group has a strong track record of generating good profits and turning those profits into cash. We generated GBP 33 million of cash from operations and a cash conversion of 118%. So we've kept our discipline in this area for more than the past 2 years, and we've also been able to reduce overall levels of working capital.

This cash generation serves to support our policy of providing shareholders with progressively increasing dividend returns. And this year, we're proposing a final dividend of 82.3p per share, an increase of 10% on the prior year, which if approved at the AGM, will provide a full year dividend of 115p per share, but it is our second year running of minimum dividend increase as a consequence of the disappointing trading.

And the cash generation has served to enable us to invest GBP 7 million in CapEx this year to pay GBP 3 million in corporate taxes, distribute GBP 7 million to our shareholders and in line with our buy and build strategy also enabled us to acquire the remaining stake in our subsidiary, Geotek's Brazilian business and still reduce our net debt. And adjusted net debt at the end of the year was down GBP 8 million to GBP 42.6 million. And we had gearing of 1.5x at year-end, significant headroom on our covenants and still a strong balance sheet position.

So looking out to '26, and we still have a tricky trading environment. We start this year with a lower-than-preferred order book and with order intake, which is not buoyant, with global geopolitics as they are weighing heavily on the economic outlook.

And whilst we have the first positive signs out of the U.S. and the first step to restore the hiatus in the research funding, we are yet to see the funds flow and consequently, any formal green shoots of recovery. And therefore, the guidance that we provided shareholders within our January trading update still stands.

Moving on to the next slide, please. I'm just going to pick up 2 things on here. One, Tim touched on just before, our margins, which have declined and it's disappointing. Whilst we managed to grow revenue, costs have grown at the same rate. And that's really an effect of a certain amount of investment in head office costs in line with the succession planning that Tim talked about before, but also a number of our businesses investing for growth, which unfortunately didn't come. And consequently, we took some actions later in the year to adjust that, but the effect of those adjustments have not had a material effect on the '25 results.

Now we also have material adjusting items. I just want to talk about those for a moment. The largest component, GBP 10 million of that is the noncash amortization of the intangible assets we recognize when we acquire businesses.

But there are 2 other material items to talk about this year. The first relates to our 2024 acquisition of Rockwash. And that came with significant earn-out, which when you acquire a business under the acquisition accounting rules, you have to make your best estimate of how much you think you're going to have to pay for that earn-out announcement. So we did that. And at the end of 2024, we had an acquisition payable of GBP 2 million. And at the same time, when you do that, you also have to increase your goodwill and intangible assets. And so we had a further GBP 2 million that was in line with that GBP 2 million of payable.

Now during 2025, it became apparent, and we've seen the first signs of that at the half year that Rockwash's performance may not get them an earn-out, and it turned out that actually no earn-out was payable. So consequently, we've reversed an acquisition payable of GBP 2 million with a credit into adjusted items of GBP 2 million. And at the same time, we've also impaired those assets, the goodwill and intangible assets that were created as a result of creating the payable. And so we've also had a GBP 2 million debit. So overall, no net effect in the P&L and no cash effect either.

It's something worthy of note. At the same time, we have also recognized a GBP 2.3 million impairment to the group's goodwill for its investment in Armfield as a consequence of the prolonged period of underperformance.

So moving on to the next slide. And just to take everyone through the graph and there are 3 lines on it, as I always explain, a red line, a black line and a green line. The red line is our internal sales budget, which we set once a year as part of our budgeting process. The black line is our trailing 12 months of orders and the green line is the last 4 months of orders annualized. The end of the graph is the middle of March this year.

So what are we looking for? We were looking for ideally for the black line to be at least touching the red line by the end of the year, such that we've had sufficient orders in which to satisfy our sales budget and ideally for the green line to be tracking the red line, so we have optimal operational capacity.

Now if you look at the graph and take you back to the middle of '24, you can see that we started building momentum in orders. If you look at the green line and to a degree the black line, that kept rising up. And actually, the first quarter was good, and we were still going. When you got to the end of Q1, it turned and then it tumbled. And it only started to improve during Q4 although if you compare the size of the Q4 on the green line to what it was at the end of '24, there was a big difference. And this is why when we've explained it in our results, that organic intake was up 4% at the end of the first half. By the end of August, it was flat. And by the end of the year, it was minus 6%.

And whilst we've had areas of decent performance, both in China and in Europe, they certainly did not be -- were not able to offset the significant effect of near on 25% drop in North America. If you go back and look at the graph for the last couple of years and you compare the black line with our sales budget, you may be forgiven for thinking we've been a bit optimistic with our budgeting. And in fairness, the consequence of that is that for 2026, we've had a reset and consequently, why at the start of this year, our budget was aligned with the trailing 12 months of orders.

So as we go into 2026, we have a lower than preferred order book and orders year-to-date are behind the same period in '25. However, it's fair to say that the '25 comparative had no effect in relation to the U.S. academic research funding cuts.

Moving to the next slide, please. Moving on to the bridge. And this reconciles between 2024 and 2025 profit contribution of our businesses before central costs. They are the 2 big blocks at either end of the graph. And reconciling between these, you have a big block of organic growth. A large part of that is the Geotek recovery, which included coring expedition, but also growth at 6 other companies, including 5 that achieved a record.

But at the same time, there was a sizable drop from decline of 12 of our companies, and this included a couple of our businesses with end market-specific challenges and a couple of our businesses with challenges in relation to products. And Ian will talk a little bit about what we're doing to address those in a short while.

The effect of the U.S. federal cuts across both the growth and the decline with the exacerbating decline and reducing the growth.

And then the final block is the full year effect of our prior year acquisitions.

So moving on to the next slide. And just going back to cash flows for a moment. Now we had good cash generation this year. Cash conversion was 118%, which on the face of it was a little bit down on the prior year, but the prior year was inflated by the fact that we had advanced payment for the coring contract. And if we regularize this, cash conversion this year was actually 136% compared with 104% last year. So it's clear our discipline on both cash conversion and also helping look at how we can reduce the higher than desired levels of working capital is working. And we've gone down to 16% this year. But the goal for us is to reach 10% and that's 10% of annual revenue.

And if we do that, we can release up to GBP 8 million of cash, which is a significant opportunity for us. And lots of focus will continue on that. And Ian will also will talk a little bit about some of the things we're doing to help release some of that over the coming couple of years.

Net debt continued to drop. And we finished the year with a leverage of 1.5x compared with 1.7x. The prior year with significant headroom in our covenants, significant borrowing capacity and the continued strong support of our group of banks, Lloyd's, Santander and HSBC who this year have replaced Bank of Ireland in the banking group, and we're delighted to have them on board.

So moving on to the next slide. I won't dwell too long on return on total invested capital or ROTIC other than say it's a key measure for us. We start on the left-hand side, when we have acquired FTT and we paid nearly 5x. So we start around 20% in growing ROTIC thereafter, requires improved financial performance and/or acquire own businesses at lower multiples. And you can see as you go across the graph, when we acquired the bigger businesses, GDS, Scientifica in early teens, we paid 6x for them that were big deals for us back then when we also acquired Geotek in May '22 and paid 7x. The smaller deals minimally affect ROTIC now.

And whilst we managed to increase ROTIC for the year end by 1.3% to 17.8% at year-end, we still have a long way to go and big improvements in our financial performance for us to be able to achieve our long-term target, which is 30%.

So moving on to the next slide, please. And I won't dwell on this slide other than to say diversification works for us. And what I mean by that is in a year where we suffered significantly in the U.S., the group has still managed to deliver earnings that are more than 2/3 of its previous record. But at the same time, it's clear to us that we could and should be better diversified, particularly in our exposure to industry. And again, I keep giving Ian something to do. He'll be talking a little bit about what we're doing to address this.

So moving on to my last slide. And this slide summarizes some key financial statistics about the long-term success of this group. Revenue, profits and earnings per share have all grown strongly over our history, and we continue to have long-term high-quality CAGR organic revenue of 7% with associated EBIT growth of 8% over 19 years.

Dividends have grown strongly over the life of the group, and we're proposing an increase of 10% to the full year dividend. And the compound growth of the dividend remains above 20%. And the group's continued to focus on cash generation served to protect it in times of challenging market conditions enables us to rapidly pay down acquisition debt and supports that progressive dividend policy.

And on that note, I'll pass back to Tim to talk through the growth strategy.

Thank you, Brad. So yes, Ian and I, principally Ian, I have to say, will talk through the growth strategy. I'll talk us through the acquisition side and then hand over to Ian to talk about some of the organic initiatives. So next slide, please. So yes, buy-and-build strategy, as I mentioned before, split across acquisitions on organic growth.

So if we move straight to acquisitions on the next slide. The headline here is strict discipline. If I talk through some of the attributes of our target businesses and emphasize what that means for us. So what makes target business for Judges and the Judges model? We are looking for strong exporters in global niche markets for scientific instruments and techniques.

But I think important to emphasize that we are somewhat agnostic about what the exact scientific techniques are. So we have a broad diversification of techniques within the group.

We're also looking for cultural alignment. So a focus on innovation, a focus on entrepreneurialism, openness and frugality in how the business is managed. We ask and expect the MDs of our businesses to lead those businesses as if they are the owners. So we are looking for the owners of businesses from whom we are acquiring to also be leading those businesses figuratively and literally as if they are the owners.

We also look for robust margins. That demonstrates differentiation and pricing power. And we look for businesses that generate sustainable EBIT and cash flows at high return on sales. A key takeaway from there is that we are focused on high-quality businesses. We are not focused on the turnarounds, for example.

Deal parameters, we paid 3x to 7x EBIT. More typically, we pay 4x to 6x according to size. We have flexibility in our deal structure. What we mean from that is we include things like earn-outs where that's required. There have been some occasions where former owners have also bought back into the business in some context. So where it's important that we allow some flexibility in the deal structure to make sure that we can unlock deals. And we're funded with cash and debt, borrowing up to 3x EBITDA, 3% to 8%.

In 2025, we finalized the acquisition of a minority holding in Geotek do Brasil. Geotek do Brasil is a Brazilian-based services part of the Geotek business, an 18% minority share that was not acquired at the time that we acquired Geotek was acquired last year for GBP 1.9 million plus excess cash and an earn-out up to GBP 0.7 million. And that's low risk for us. It was a business that we knew and understood and has been immediately earnings enhancing.

Let's talk through the key attributes of the deals through those, the green dots at the bottom. So we buy high-quality businesses. So we don't focus on turnarounds. We look for high quality in the attributes that I mentioned above. And also, we buy businesses that are for sale, the owners have come to a conclusion that it's time for a transaction. That is the deal pool within which we look. Deals can be characterized by long incubation. So although a lot of the deal flow that we look at is inbound, we also do develop relationships with potential companies and potential sellers, but some of those could be a decade or more in terms of incubation before the seller comes to the conclusion that now is the right time for them to sell.

Crystallization is notoriously erratic. And what we mean by that is that we can't always be certain around when the seller is going to decide that it's the right time for them when the process is going to work out or exactly the timing of this.

We absolutely do not look to target ourselves with 1 deal a year or achieving a particular deal. That's an important attribute to the context of this next circle. We aim to do deals. It's a fundamental part of what we are and who we are. We need to do deals, but not any specific deal. So we must always have the opportunity to walk away. We don't tend to focus very -- on very specific areas of technology that means, for example, there's only 3 companies, and we have to acquire all of them. We don't put ourselves in a situation where we can't walk away from a deal. Okay. So we aim to do deals but we -- but not any specific deal.

And David, over the last 20 years, built Judges a reputation as an honorable acquirer. We are very conscious that we do lots of deals. But generally speaking, the people from whom we acquire are going to go through 1 deal, maybe 2, but typically 1 deal in their lifetime. This is a process which is stressful. This is a process to which they're not used to. And we see it as vital that we have a honorable approach to that process. And we don't chip. So whatever we agree in the heads, subject to not finding anything materially different through our diligence process, that's the deal that we honor to provide that certainty to the seller. The model then is to generate cash, reduce debt and repeat.

I'll now pass to Ian on the next slide to talk about our organic growth strategy.

Okay. Thanks very much, Tim, and hello, everybody. Okay. So this slide really covers our model. And I'm not -- I'm sure everyone on this slide -- on the call is not familiar necessarily with our model. But the key word is decentralized and I'll explain what that means in a minute.

The left-hand side is -- talks to our kind of framework and structure of the business. The right-hand side is more about our culture and our growth ambitions. So we're a decentralized group, which puts considerable autonomy and responsibility and indeed trust on the individual businesses, 20-plus businesses that we have across the group.

And really starting on the top left-hand side, strong leadership teams. That model only works if we do indeed have that a strong leadership team. So we spend a considerable degree of time focusing on our leadership and our leadership skill sets.

2025 has actually been a bit of a year of change for us. We actually changed out 7 of our MDs for different reasons. And please don't take away the impression that we're a hire and fire group. That's absolutely not our culture at all. But for different reasons, MDs change. We changed 7. And whenever this happens, it's an opportunity to bring in additional capabilities and so on. And not just MD, all of our businesses will have strong leadership teams covering finance, sales and marketing operations, engineering and so on, all the disciplines you'd expect. So 2025 has been a year of considerable talent recruitment. I think we all believe that we now have the strongest leadership teams we've ever had in our businesses.

Focusing on the middle circle, the robust governance and financial controls. Of course, the decentralized group only really works if you do have some control. So of course, you've got your usual financial controls, as you would expect in any business, but we also make sure we have a rigorous set of controls, particularly around export control, for example, and the training there. Cybersecurity is obviously a big theme for us and making sure we're up to speed on that, doing that correctly.

And more recently, for example, we've implemented an AI best use policy. I mean, partly to, if you like, set a floor in terms of our minimum standards expected, so we've got responsible use, but also, frankly, more focus on best case examples of where you can get growth using AI.

I should also stress though that the whole -- whilst there is robust governance and financial controls, we do aim for it to be as light touch as possible. We do not want to encumber our businesses with overarching processes and systems. And indeed, in the center, we do not have the resources for that anyway. We are deliberately an asset-light business and have a small center. All of our resources as much as possible are out in our businesses.

So the left-hand side is working correctly. There's good autonomy and accountability to the center. You can now focus on the right-hand side, which is really about our growth culture and how do we aim to do that.

So the top right one is leveraging group-wide experience. We have incredible people across our businesses in all of the disciplines I've mentioned. And one thing we've made good progress on in '25 is creating communities and leadership groups in all these disciplines. So we have a really maturing sales leadership group, taking our top sales directors looking at best practice there. It could be, for example, looking at training, could be looking at CRM, pipeline management and so on.

We do the same in operations, particularly looking at things like working capital, which I'll talk about a little bit later. It could be an engineering, around recruitment best practices, patenting, patent best practices. And these communities have been tremendously successful in sharing best practice, creating almost like a self-starting community amongst themselves. Our businesses are all small businesses. It can be a little bit lonely, I guess in time, so it's creating these wider communities and that they're really self-starting.

Through that, then we can -- in the middle point, we can also promote excellence. So of course, in our roles, we see some tremendously interesting strategies and projects that we do. And then we really try to promote some excellence across the group. One of the things we've done quite recently is looking at application of AI for growth, and we've had a number of projects across the group, for example, AI service engines in one of our businesses to hugely improve customer service and knowledge management within the business.

Another one focus on business development to enable us to rapidly move into a new vertical market using existing technology, an area we're less familiar with. So that was very exciting.

And the bottom right is encouraging ambition. I'm going to talk a little bit later about that, but that really talks to our strategy process. We aim -- we task the businesses to come forward with ambitious strategies, which will double EBIT in usually 3- to 5-year kind of time frame, but I will talk about that a little bit later.

Next slide, please. So we've listened to requests over the years for a little bit more detail of individual businesses. We have talked about Geotek in the past, but we thought we'd lift a little bit and pick up some themes to explore. Now the first one of these is identifying certain long-term growth drivers. And my colleagues have already mentioned that we've had good success in '25 in selling to industry. I think that's been one of the bright spots of the year in otherwise what's been quite a difficult year. And here's 3 businesses, which have done really well in taking core scientific techniques, often which have been developed in an academic environment and applying them to business.

We all know the industrial market is much larger than the academic market, so there's huge potential. CoolLED would be a kind of poster child for that for us, taking a core technique, in this case, LED illumination, traditionally for fluorescence microscopy, which is a core technique in spatial biology and life science. Firstly, applying it to automated fluorescence. So this is in the diagnostics world in industry, but then taking it to a completely new area, which is semiconductor inspection. And then that's an exciting growing theme for us.

The other 2 businesses, Dia-Stron and Scientifica also have very strong industrial sales as well. All 3 businesses are trading at a record. So that was a real bright spot for us.

The next slide, please, where it talks about specific challenges we've had. Now we've alluded in the past in communications to specific product-related issues we've had in some businesses. So we thought we'd lift the lid on that a little bit.

And the 3 businesses, in this case, we're talking about are listed here on the left. Our first one is for Firetesting Technology, which is a kind of fire science business. It looks at, as the name would imply, testing materials to certain standards for use in -- often in buildings. Market leaders for many years. Business ran into certain product obsolescence, product problems, increased competition, that's caused us to actually need to accelerate some investment in that space to recover what is otherwise a very strong business and a strong brand. It's a multiyear project, right in the middle of it, but it has caused financial performance issues and so on, but it's something we're absolutely focused on at the moment.

The second one would be Armfield. It's a slightly different product-related challenge, but nevertheless equally serious. Armfield has many products. It sells equipment for education in academic university environments largely and also food science, food technology. Coming out of COVID and the period after that, traditionally, Armfield has outsourced a lot of its manufacturing, ran into numerous supply chain issues and suppliers exiting the market. So it caused us to find a lot of new suppliers, caused us a lot to require to in-source a lot of stuff. And across -- because it's so many products, it's actually been a multiyear projects, which we are still in the thick of, have made some good progress in '25 and continue to do so, but it has been an area of big focus for us.

And the final one is Scientifica, which is a slightly a different example. Again, it's a product-related example. Our ideal Judges product, if you like, is a product which sells in a niche. It has a strong market share and technological advantage in the niche and enables us, therefore, to get pricing power and so on. Where we do not have that and we recognize it came to recognizing in one of the Scientifica products was not -- didn't have those characteristics. We looked at a number of options. And in the end, we decided to exit that particular market and obviously had to take some costs and run through that in 2025 as well.

And we did it, of course, respectfully with a view to looking after existing customers for a certain period as well. It's also worth pointing out actually that both Armfield and Scientifica are our businesses with some of the most exposure to the U.S. and U.S. academic markets. So that hasn't helped the whole picture for these 2 businesses.

Okay, next slide, please. So this slide looks at the disciplined ambition and how do we set the right culture so that we get the business to really focus on growth. It obviously stems from having the right leadership in there in the first place that I've talked about. But once we've got that, we then absolutely encourage a focus on where the growth markets are, where the growth opportunities are. We do that in a number of ways. We have an annual strategy process about to kick off actually in -- towards the end of Q2. And here we look at, as I alluded to, we wanted to put together plans which will double EBIT in 3 to 5 years.

They need to take a very market intimate view. Obviously, that comes from a knowledge of where the opportunities lie in the market. It also comes with a discipline and focusing on the right areas and not too many areas. So we -- in the process, we have what's called key strategic initiatives, no more than 6, preferably fewer. And these are the key things the business is going to do over multi-years, which is going to deliver that growth. We then monitor these on a monthly basis with the management teams.

The other thing we're doing this year, which we'll talk about, I think, in future communications is really focusing on innovation and how we measure innovation. Innovation is obviously the life blood for future growth. And there is indeed a strong correlation between those businesses which have done well in '24, '25 and their ability to consistently deliver products to the market, which will take market share and indeed the reverse.

So we're going to be coming forward with a vitality index, which will be a measure of the percentage of revenue coming from new products or margin from new products, and that's something we will communicate in future communications.

Okay. And then final slide for me. I think I've saved the best for last, which is the improved working capital performance, everyone's favorite topic. Brad has already alluded to the fact we made some progress in '25, but not as much as we would have liked. So we are targeting another GBP 8 million improvement in working capital. And a lot of that will come from better inventory management. And once you Pareto it out, it's really about half a dozen of our businesses, which still got the biggest challenge, complex set of reasons. If it was that easy, we would have already fixed it, I guess.

Some of it is around procuring maturity and procurement teams. Some of it is around ERP, MRP systems and the correct use of them were indeed having them in the first place. Some of them is around sort of work in progress processes and so on. So it's a complex set of challenges in these half a dozen or so businesses. Here, we are leaning on our operations network, which I talked about earlier and actually. But also this is something that Mark's working on. We're taking our top operations and leaders in the group and helping it with a task force basically to help these half a dozen businesses to really focus on best practice to help them drive their working capital to where they want it to be. So I expect to report on some progress on that throughout the year.

Okay. Well, I hope we appreciate a bit of a deep dive into some of our businesses, some of our challenges and opportunities. I shall hand back over to Tim.

Thank you, Ian. Great. Okay. If we can move to the next slide, please. So I'm going to bring the presentation to an end just by talking about the outlook and investment case and then we'll move into Q&A.

So firstly, the outlook, if we can move to the next slide, please. So the summary point here for 2026 -- sorry, it's just -- yes, that's right, Slide 23. I think it's fair to state the obvious geopolitical turbulence continuing into 2026 and acknowledging that, that's things -- those are clearly things that we can't control. And in many cases, things that -- it's unclear yet what the full outcome of those would be, but significant levels of turbulence continuing into this year.

We'd also highlight that uncertainties remain around U.S. federal funding. So since our January update, trading update, the U.S. Congress has approved the next round of the 2026 budget for U.S. funding of scientific academic research, and that funding was restored to prior levels there or thereabouts. We see that as really positive news insofar as the opposite would obviously have been very negative news.

But at the moment, there remains uncertainty, okay, around how that -- how the funding will actually flow. So the positive is that it's been signed. It's been signed into law and particularly that there was very strong bipartisan support for that bill, which is something that isn't heard of particularly often at the moment in the U.S. So we do see that as a long-term positive indicator that the U.S. does want to return to some sense of normality in terms of funding fundamental scientific research as a core driver of societal growth and improvement.

But what remains uncertain at the moment is the timing of how those funds would actually be disbursed through the various funded granting bodies, like the National Science Foundation, the National Institutes of Health. And in turn, how that funding will find its way into grant applications. So there remain uncertainties around that funding situation for us.

You will have seen from the order book chart earlier, after a strong Q1 last year, we had a much weaker Q2 and Q3, a little bit of recovery in Q4, but still lower than ideal. And the result of which was that we brought forward into 2026, a lower-than-desired order book at 15.7 weeks.

Our year-to-date order intake is 17% behind the same period last year. As Brad mentioned earlier, it's worth reminding that, that is relative to our strongest period last year. And it's also worth mentioning that it's still early during the year. So at 17%, it could be a couple of instrument orders or a stocking order from an OEM or a distributor that could shift that percentage by a few points either way, but it's still behind where we would like it to be.

All of this reinforcing for us that the key thing that we need to do is control our controllables. There are various things that we just don't have control of like geopolitical turbulence. But if we control the controllables as best we can, then we stand a much better chance of navigating those things that we can't control. And for us, restoring performance is key.

We reiterate we are confident in the long-term drivers and the business model is intact. We think in the long term, that underlying demand for the types of products and services that we provide will continue to grow. There will continue to be demand for scientific instrumentation servicing academic research and growing into commercial and industrial applications.

And our business model, our disciplined acquisition -- disciplined acquisitions and our organic growth model remains intact, and we remain committed to it.

Our 2026 guidance is for earnings per share between 200p and 250p. So that remains unchanged for our update in January. We'd also like to remind that at the moment, we believe the next Geotek coring expedition is expected in early 2027.

In other words, the 2026 guidance does not include the Geotek coring expedition.

Okay. I'll move on to the next slide now, please, which is the final slide, a reminder of our investment case. I think the key things to remind here, the business model, 3 pillars of our shareholder value, the long-term drivers, the large deal pool and the low capital use. Those remain the same and remain intact.

We have a robust business model that we pursue with discipline. Earnings-enhancing acquisitions, we are diversified by geography and diversified by application with our diagnostic approach to the businesses that we acquire. And we delivered dividend growth a 10% plus for 19 years, a CAGR of 21% since 2005.

With that, I'll bring the presentation to an end, and we'll move to our Q&A. Thank you very much.

Thank you for the presentation. We have had a number of questions presubmitted and submitted live. [Operator Instructions]

Our first question is, could you please address why your capital allocation strategy does not include a more substantial share repurchase program, especially since your shares currently seem to trade significantly below their intrinsic value. Wouldn't the share repurchase program be a more tax-efficient way to reward shareholders than a cash dividend?

Thanks, Ivy. So yes, it is something that we have been discussing and discuss on a regular basis, but I will hand over to Brad for that question.

Thanks, Tim. It's quite clear that we understand that the share price is lower than it has been for some time. But when you actually do the math, and you look at the return you get for a share buyback at the moment, the consequence, especially in a year where we expect our performance to go backwards, given the circumstances that we've already communicated to the market, what doing a share buyback program would do for us would be to increase our leverage, take us much more highly levered and therefore, add quite a significant cost to our interest such that for any reduction or improvement you get in context of the savings you get by reducing dilution, and the impact on earnings per share is actually less than that you get the dilution.

So at the moment, unless our share price was substantially lower than where it is at the moment, it actually isn't very good value for shareholders, particularly if you're comparing the use of that capital compared with completing an acquisition, which gives you a much better return on your money, particularly on average that we get 20% return on our money when we acquire a business.

So I appreciate it's a very reasonable question to ask. If we were in a period where we really didn't foresee the ability to complete acquisitions, then I think share buybacks may become a more pressing question for us. But as it stands at the moment, we feel it's not the best use of shareholders' funds.

If I layer something on there as well. I assume the point around tax efficiency is regarding potentially a choice between dividends or share buyback. And we're also -- we're very cognizant that our shareholder base will include many different people and institutions with different demands and different requirements. But we wish to continue to provide our shareholders with a means to generate income without having to sell down their shareholding.

Next, we have, are you still finding good businesses to buy? Or is it getting harder?

So the context of that question, if it's intended in a long-term view, I think, yes, we are still finding good businesses to buy. So we don't see it as something which is getting harder in a sort of sustained or systemic way. I think what we would highlight is the current environment is challenging. There are -- we are looking to acquire high-quality businesses, high-quality businesses with owners who wish to sell but they may not wish to sell off the back of a poor year, if there's been a poor year or they may have a particular number in mind and that number in mind may imply a higher multiple or a higher valuation if they're not performing at their best at the moment.

So what we're tending to find is that sellers are patient and we need to be patient as well, while there may be opportunities to acquire lower-quality businesses, that's not our strategy.

And where do you think the biggest business risks are right now?

I think -- I mean clearly, there are the various geopolitical risks that we've mentioned, which -- and the main risk there, I guess, is the unknown, we should highlight, and I wonder whether it might be a question, but our direct exposure to the Middle East is not very much, around 2% of revenue. So in that sense, there's not a huge risk to the group as a whole in that respect. But it does rather depend upon the extent to which that conflict grows or escalates or what the knock-on effects are. So for sure, that is a major concern for us.

The other major concern is obviously the timing associated with the return of U.S. federal funding and our exposure to that. I guess I'd also highlight the requirement we talked about focusing on controlling the controllables, helping those businesses who are experiencing some challenges to get those fixed.

So the longer that takes us or the longer that goes on for is some degree of risk as well. Ian, anything else you'd want to highlight in there?

I think it's pretty comprehensive. I think I maybe just add the -- with governments around the world potentially under the financial stress, there might be a question on academic funding more generally, not just in the U.S. Obviously, we hope that's not the case, but we don't know. I mean and that we still sell obviously more than half of our end user customers are in academic institutions.

Yes, that's a very good point, Ian. Of course, we know that the U.K. government is also talking about funding associated with some fundamental research, okay? If that's a theoretical research, perhaps we're less directly impacted by it, but it's clearly an example of a government making a choice of where it wants to deploy its limited set of funds to. And so that is a wider risk for us as well.

Our next question is, if the U.S. doesn't recover and there's no big project, what does normal look like now?

Brad, do you want to take that?

Yes. I mean I think that it's a stretch to think that the U.S. will not recover. The question is about the timing of it. So I would challenge that theory to say that the U.S. understands as the consequence of signing the bill and with cross-party support that investment in R&D in the U.S. is what has made that economy great for the best part of the last 100 years.

And I don't believe that anyone across government as a whole, and that's a strong statement for me to be making in fairness, really believes that we shouldn't do proper research. So I don't believe that, that is a long-term event, maybe not even a medium-term effect, but the question is in the next few months to a year or so, whether it starts coming back to the rate that we hope it should come back to.

So I'm not sure I could call it a new normal. And I think we have an expectation that how businesses produce high-quality equipment for markets that need their equipment and that we shouldn't be expecting the expected performance of '26 to be our norm. And I don't think we should strive for it either.

I think it's also worth adding, just reemphasizing, Brad, that we -- the guidance we have put out for '26 does not assume a recovery in the U.S. I know you said that, but just to reemphasize that point.

Absolutely clear, Ian. And we are -- so that's why my expectation is that this is not the new normal, but it's a base we build from.

Thanks, both of you. Agreed. Our guidance GBP 200 million to GBP 250 million was based on no recovery in the U.S. and no coring contract, but we absolutely wouldn't regard that as the new norm.

Next, we have organic growth, excluding Geotek. Will there be a recovery by 2026? And how is diversification progressing with regard to clients dependent on government budgets?

I was going to say I think the second part of that question is, I think, Ian, covered that earlier in the presentation. And the first part, well, if you compare our results or our predictive results for this year coming to last year, the flat answer to that is that we shouldn't expect '26 to be a year of a return to organic growth, unfortunately. However, what we do believe, and I've said this earlier, is that fundamentally, the conditions over the medium and long term exists for us to be able to continue to grow at least the long-term CAGR of 7% that we've done over the last 19 years.

And there's no one across our team that believes any differently, but we do know that every so often, there can be moments when we have a hiatus, but we need to look very, very hard to try and avoid that.

Even though acquiring companies at your target multiples might be harder in Continental Europe, Asia or the U.S., assuming you don't find a perfect fit, is your pipeline actively looking at international M&A at all right now? And if so, would you be open to new stand-alone platforms? Or are you strictly focused on synergy-driven bolt-ons like Bossa Nova or Luciol?

Great question. So the way I'd add to that is coming in from a couple of points of view. The majority of companies that we've acquired are clearly U.K.-based companies with the exception of an acquisition in the U.S. and an acquisition in Switzerland.

But it will be incorrect to think of us as a solely U.K.-focused acquirer. We are -- we recognize that we need to raise our profile. And so it's something we absolutely want to do is to raise our profile through acquisitions, certainly in the U.S., certainly in Europe, possibly wider than that as well.

And yes, we absolutely would consider acquiring businesses outside of the U.K. The fact that the businesses that we have acquired thinking about Luciol and Bossa Nova have been synergistic bolt-ons, I'd say, is actually rather coincidence than anything else. It's not that that's our focus for acquisitions outside the U.K.

Where I might say that there might be an area for us to consider is would we -- if we were looking to acquire somewhere outside the U.K. as a stand-alone entity, would that be a completely new market or would there be something which is at least some sets of synergy with a market that we already have some involvement in. So that might be a consideration, but probably not a limitation. So yes, we're absolutely interested in acquiring overseas.

Our next question is, have you seen increased competition from Chinese firms acquiring U.K. scientific companies for IP?

I think the simple answer to that is, yes, we generally see a higher level of competition from Chinese companies. Ian, do you want to elaborate a bit more on that?

Yes. I think I'd answer that in 2 ways. One is certainly within China itself, there is a lot of innovation going on. There's some very competent competitors. Not that we fear that. In many ways, competition is good. And they're increasing -- the best of them are increasingly now coming and approaching the world market.

Whilst we should be cognizant of that and appreciative of that, I actually am confident that with the relentless focus on innovation that I talked about and the agility that our businesses have and that market understanding, I think we can come through that. So we see that actually as something we need to deal with obviously. And in fact, I alluded to with the Firetesting Technology business that is, in fact, one of the reasons why product update and that investment we need to do is in direct response of the Chinese situation.

But it's something -- it doesn't overly worry me, but it's certainly something we're cognizant of it.

Our next question is Rik Armitage joined the team almost a year ago, but we've yet to see acquisitions come through. While I acknowledge that the M&A environment might not be the best, can you share any qualitative insights on the M&A front since Rik joined the team? Has the pipeline gotten larger? Have things progressed through the pipeline?

So I think the simple answer to that is, yes, there is activity. There is outreach and response to -- as well to inbound inquiries. We are ongoing conversations with a number of opportunities. But I'd highlight the points that I raised on my slide earlier, this is notoriously erratic in how it progresses. So we are pleased that we have that additional bandwidth and it is allowing us to move through and sit through opportunities quicker. Rik is providing an excellent level of outreach, of investigation and our triage in some description, which is proving very effective for us.

But yes, I acknowledge that the -- other than the Geotek do Brasil, there was not an acquisition closed last year.

Next, we have, Brad, there was a GBP 1.9 million acquisition of Geotek do Brasil, but I cannot see any corresponding cash outlay in the investing or financing activities of the cash flow statement, motivated by wanting to understand free cash flow.

That's okay. You may have missed the short summary in the acquisition that explains that what we're doing with the -- that acquisition is we're actually paying it out of the 60 monthly installments. So it is a long-term payable that we have. So that's why you won't have seen the amount going out. We owe it, and we're quite happy to acknowledge that we owe it and it's an acquisition payable on the balance sheet. But we haven't yet settled it all because we're paying it over 5 years.

Additionally, there is a potential earn-out of up to GBP 0.7 million and that will be payable based on next year's performance. And if they achieve the maximum, then we'd be paying that in 2027. That would be a lump sum. I hope that answers your question.

Our next question is, the rules for vesting management options have been weakened, and I believe the new threshold is 5% per annum growth. Given the recent performance of the company, wouldn't it be more aligned with interest of all of the shareholders, if the company went back to the old minimum 10% per annum growth vesting threshold even if the awards were scaled up somewhat, i.e., more lucrative upside, but awarded only when the performance -- sorry, only when the performance really is exceptional rather than just barely inflation matching.

Noted. I have to say I'd have to take guidance on what the historical was because my understanding was the historical was closer to 5% and it moved to 10% for a period of time. So it's moving 5% back down to where it was historically. But I mean, the question is certainly noted and that's a conversation that we would be having with our remuneration committee.

Our next question is, knowing this organic revenue was not increasing, why were steps not taken in advance during the year to cut costs to match the adjusted revenue, leading to a fall in profit?

I think I'll -- if I may, I'll take that one initially, but then also Brad, Ian, please come in. So I think the point I'd make there is that there were several examples during the year of actions that were taken on cost. So for example, right at the beginning of the year, there was some restructuring in Scientifica after we exited the product line. So yes, some costs associated with that, but also costs coming out of the business.

And then throughout the year, there were actions taken on cost -- on head count, I should say, that resulted in some restructuring costs and reduced head count.

I'd also mention that correspondingly, there were some investments. And we mentioned already some of the investments in R&D and engineering effort required at companies, including FTT and management capability, management bandwidth, generally investing in talent across the group and particularly where there were growth opportunities.

So we did take action. But we acknowledge though that there was an increase in the overhead that closely matched the revenue increase.

I would add a little bit to this, which is firstly, that the issue in relation to the U.S. came out at the end of Q1, where we had a pretty good first quarter. It becomes an emerging issue, which we originally thought wouldn't be as significant. And maybe that sound overt to you but when we were at the year-end results last year, we did explain that we thought it wouldn't be that significant. So it took time before we realized it was bigger than perhaps we thought it would be and for the fact that it was prolonged.

The second thing I would say is, which is an easy thing for us to do, which is to say, well, if your revenue is not going to be as high, then you should cut the requisite amount of costs. And I think an important thing for us to say is we're not a sort of slash and burn type organization, and we certainly don't have the aggressive mindset about short-term cost cutting that you would find in a U.S. corporate. And we think that's important and for good reason because we're trying to build for the long term. And if every time you have what you believe might be a short-term hiccup and you slash your costs, you damage your culture and you damage your long-term outlook.

So I think the other side of this is also that we've taken and challenged our businesses about taking the right steps as a consequence of not having a successful year as we hope we had last year and on the back of the fact that we had a tougher year for us in '24 as well.

And I think we took prudent decisions as a consequence. Now I would note one other thing, which is that if you read our accounts carefully, you will note that we haven't ever, certainly during my 11 years of tenure, ever recorded exceptional items for restructuring costs. And we haven't done so this year either. And so we treat those costs as a cost of doing business and such that those costs go through our trading P&L. So part of the reason we also have slightly higher cost is the effect of the cost of making those changes is also in our trading P&L, not separated out like a one-off item.

Yes. And I think just to add to that, Brad, I think to some extent, that hides the fact that several businesses did go through some difficult restructuring with all the cost for that. A lot of that was midyear for the reasons you've just said has go through the P&L, and we will only see the benefit -- we are only seeing the benefit of that this year from an overhead standpoint.

Our next question is, what makes you confident that the Geotek coring expedition will take place in 3 out of 4 typical years given that the last 4 years suggests more of a 2 out of 4 max is more likely.

What -- sorry, the next part is, what impact do you think the environment -- sorry, what impact do you think the environment of longer-term higher oil prices would have on the likelihood of expeditions to take place and their profitability?

Great questions. So I'll address them in order. The customer base for these pressure coring acquisitions is relatively small. Historically, this has been related to country-sponsored expeditions and those sponsoring countries have been Japan, China, India and the U.S.

What I mean by that is that the overall landscape here is relatively small in terms of the people and the organizations involved in this, and we are well-known in the landscape and well-established and know and understand what's happening and the people involved in there.

So there are conversations ongoing all the time. We hesitate to call it a pipeline because what always remains unclear is the exact timing of these things. And Geotek really doesn't have a say in the timing, it tends to be dictated more around seasonal issues depending on -- for which country and which location this is. And these are major projects, major undertakings involving multiple activities, multiple projects, the hiring of the vessel and so forth.

So they tend to be a long lead time and with some significant uncertainty in the timing but our knowledge of and conversations with the people involved in this sort of ecosystem gives us a good degree of confidence in that sort of regularity of those expeditions.

The second point I'll respond to, but I'll say very openly, that it's rather speculative. Our sense of high oil prices, our correlation with the oil price or a correlation of the realization of how sensitive the world is to certain restrictions, for example, the Strait of Hormuz and who has control over that, it would beg the question whether is that going to accelerate countries who currently rely on that to take a look at alternative arrangements, alternative, whether that means a faster transition to wind power, for example, or other green energy, green energy technologies or whether that means investigating alternative hydrocarbons.

And yes, it is the case that the methane hydrates that are part of these coring -- that form the basis of these coring expeditions are vast resources of alternative hydrocarbons. And so it's rather speculative. We just don't know and these things would take many, many years to develop. But it could be that if the oil price stays at a sustained high and if the volatility in that particular region remains the case, then that could be a long-term driver for that.

Next, we have, you mentioned in your report that this is the final year of increased capital expenditure. How should we view the situation from now on?

To extend the words for all of the other viewers, the comment is in relation to capital projects within the group. And this is -- we're coming to the end of what think has been almost a sort of fully -- what feels a bit like a full year of project. But a number of our businesses moving and either us funding a new building acquisition and its subsequent refurbishment or something similar to that.

And the last one of our businesses are in the middle of the final steps of their move. The building will be ready, I think, at the -- within the next few weeks. And so as it stands at the moment, we have no large capital projects that I can see on the horizon such that and that should mean that a couple of million less a year will be spent on CapEx for the foreseeable future. I hope that helps answer.

Our next question is, after the Armfield pension buyout, is there any material DB pension scheme exposure across the rest of the portfolio?

I'm glad to say that this was the only scheme we had. It should be within the next month or 2, no longer on the group's books. And I'm glad to say that we've been able to secure and guarantee the future of all of the pensions within the Armfield defined pension scheme, and there are no other defined benefit pensions scheme within the group.

Our next question is, what percentage of group revenues come from replacement parts, maintenance, consumables spending on existing instruments versus new equipment sales?

Brad, do you have that number to hand?

I don't have that number to hand. It's a very good question. Around 85% of our group's revenue is instruments, spares, et cetera, and around 15% is services, of which a large chunk of that relates to services that are outside what you just mentioned, so some of the maintenance revenue would be quite low, maybe 1% -- 1% to 2%, something like that, a few percent for spares. What I can't really give you much of a clarity on is sort of replacement instrument cost because that's -- I just don't have the detail for that, unfortunately, at the moment.

We are -- I would say we are cognizant that's an area that we can probably improve on. We are conscious across our group. Businesses that have been selling instrumentation to their end users for decades, so a significant installed base. So an opportunity to increase the level of service and service-related revenue through value-added services is absolutely something that we want to look at improving across the group.

Next, we have, do subsidiary businesses ever make their own acquisitions or are they all done by HQ?

So the simple answer is they're all done by HQ. There might be examples and situations where a subsidiary suggests or brings an acquisition to us. That's happened on a number of occasions. But the actual implementation and development of the app, the running of the acquisition process is something which is done at a group level. But there are also in some cases where the acquired company is from a structural perspective, is acquired by one of our other group companies. But essentially, the acquisition process is run by group.

Our next question is, does the ambition for businesses to double EBIT over the next -- sorry, over 3 to 5 years, imply Judges ambition is for organic EBIT growth, well above historic levels of 8%?

If I may, I'll respond initially for this and then Ian, can I get your views as well. I think the context I'd like to frame this in is by saying why it is that we challenge the companies in that way. So the strategy plan process asked the companies to respond to the challenge, how would you be or become a business that doubles in size every 3 to 5 years. And as the question says, that implies 15% to 25% growth a year, which is higher than our historic normal.

And I think in that context, what we're implying there is that, continuing to do as you are, as you were, delivers high single-digit growth. If you're planning and attempting and trying and investing in growing significantly higher than that 15% to 25%, then you are, by definition, doing something very deliberate about it. And it's not deliberateness that we're seeking to capture there in the planning process, asking the companies to work iteratively in a sense to try and identify what are the few and Ian mentioned earlier, 4 to 6 potentially most impactful initiatives that they could work on to deliver a higher level of growth above the underlying growth? And then what do they need to do to turn those initiatives into actions? Ian, anything to add on that?

I'm not sure I've got much to add on than just to emphasize that, yes, it gets them to think big and not sort of incrementally. And I think it's really the key message to get across the ambition that they should be looking to drive.

We are now moving on to our final question for today. If you have any further questions, please e-mail the team who will respond to any questions that weren't covered today.

Our final question is, what is the likely impact of the conflict in the Middle East, given the number of universities in the UAE and other countries in the region?

So we mentioned earlier, our revenue exposure to the Middle East, excluding Israel, is maybe a couple of percent at the moment. So in that sense, the direct material impact for us is not great, not huge, I mean.

What I think -- where there is uncertainty is how long this goes on for, and what it might mutate into, and whether it turns into a much larger issue in terms of energy and energy challenge, supply chain challenge. And I'd say, how long that goes on for. And in that sense, I'm not sure we're in a position to give a definitive response on that about how big that could be.

Thank you. That's all the questions that we have time for today. So I'll hand back over to the management team for any closing remarks.

Thanks, Ivy. Thank you. So our final closing remark is to thank everyone for attending. I hope this was useful. And thank you to Ian and Brad for your contributions as well.

Thank you to the management team for joining us today. That concludes the Judges Scientific Investor Presentation. Please take a moment to complete a short survey following this event. The recording of this presentation will be made available on Engage Investor. I hope you enjoyed today's webinar.

Good afternoon, and welcome to the Judges Scientific plc Investor Presentation. Today, we are joined by David Cicurel, CEO; Brad Ormsby, CFO; Ian Wilcock, Group Commercial Director; and Tim Prestidge, Group Business Development Director. [Operator Instructions]

I'll now hand over to the management team to begin the presentation.

Thank you very much, and thank you, everybody, for attending. I would just start reminding you -- next slide, please, what we do. We're doing a buy and build of scientific instrument companies. We've been doing that for about 20 years. And I would like just to explain why we think it's a good idea to do what we do. And of course, our purpose is to create shareholder value.

And we think there's three pillars of shareholder value. One is the long-term drivers, which is the growth in the world university population. And of course, a lot of instrument gets sold to universities for the purpose of research. And the other long-term driver is constant aspiration from everybody who does something to do it better. And if it's something physical, then to optimize, you need to measure and we sell these measurement instruments. So I think these, we believe, are secular drivers. And this is to do a buy and build in a sector where you have good drivers is essential.

Secondly, a large deal pool. When we started this 20 years ago, we measured that there were 2,000 companies just in the U.K., but we're not restricting ourselves to the U.K. So it means that every year, there's quite a large number of companies needing to change hands largely because people retire. And then low capital use. So this looks a bit stranger. And why is it important to us? Because we're not doing your traditional buy and build, which is my shares on a multiple of 20x, I buy your shares on a multiple of 10x and I've doubled my money.

But this is not what we're doing. What we're doing is we're borrowing money from the bank. And typically, we pay maybe 5x, 6x at this point, a bit more to borrow this money and we buy companies on multiple, on average of 5x EBIT, which means we have a return of 20% on our money. So you multiply your money maybe by 4x instead of 2x. But [Technical Difficulty] you are not issuing a lot of -- and the reason we have created a lot of value for the shareholders, which is something like 80x since we started if you include dividends is because we only have doubled the number of shares since we finished our first acquisition. So I think that has been a critical element of success for shareholder value creation.

So what we've done, we've done this 20 years. We've done 25 acquisitions only. So you don't need to do a lot of deals, but you need to do good deals at tolerable values. We've distributed dividends of up to 8.6x the admission price, which was GBP 1. We've created growth of revenue of 20% compound per year, and organic 7%. And EBIT has grown 26% compound and 9% organic. So this is really what has worked. And really, what makes this thing function is two things: mergers and acquisition, and organic growth. So if you don't mind getting to the next page, please.

So this management team, Brad and me, Tim were in the room. Tim and Ian are also there with us in a virtual fashion. Mark, who has been our COO for many years and has made his colossal progress over his tenure is now on the path to retirement, which should happen in about a year, and he's fulfilling a number of important central functions for us in the improvement of our business. And Rik, which was just started on the 1st of July and is an addition to our management team of one -- merger acquisition team of one, and now we have two. So we hope to increase the rhythm at which we manage to do acquisitions.

Next slide, please. So the message of this -- of course, this is an announcement of results for the first half of this year. The environment has been mixed. We started the year with a coring expedition in Japan. So that's a very profitable thing. We were very happy to start on the right foot in this year because it was January, February. We had a lot of deferred order from last year, which was a difficult year and a lot of things were late. So we started delivering all these orders which were late last year with the exception of one, which is now for '26.

And we had a good recovery in China and Hong Kong, which is back to normal, but we were severely affected by the U.S. research funding freeze. And this has been a big disappointment. And this year, which was supposed to be really starting very well, is now a disappointing year. So comparative -- we had a weak comparative last year because the first half wasn't great. So we're producing good results, but we see the weakness in order intake, and we think our year is going to be disappointing compared to what we expected at the beginning of the year. And we issued a trading statement in July, which means that it is no surprise. And now we expect to be in line with market expectation.

The big issue was obviously the U.S. impact, but some other challenges are affecting some of our businesses. And we stick to the market expectation of July. We need to address the trading challenges of our various businesses. A lot of them are related to the U.S., but there's other issues as there always is. We need to restore organic growth. We haven't done an acquisition for the last 13 months. We're not panicking about this because we need to do an acquisition 0.25 every year. And so it's not a number of acquisitions we do, but doing the right one at the right price. And we try to be always disciplined and patient about this. And we're increasing the dividend 10%. This has been our promise to shareholders since we started paying a dividend 18 years ago. We've kept that promise, but we've actually increased the dividend on a compound basis of 22%.

Next, please, and then I'm passing on to Brad because, of course, this is an announcement about our results, and Brad will take you through the results.

Thanks very much, David. If we can move on to the next slide, please. And let me take you through the results. And on the face of it, we've delivered a better set of figures compared with a disappointing first half last year. But in fairness, they were well below our expectations at the start of the year. And we were affected both, as David mentioned, by U.S. research funding cuts and also by certain separate trading issues at some of our businesses. And the consequence of that is we had to reset market expectations in July.

So looking at the results, total revenues up 15% to GBP 70 million, and that's a combination of 7% organic revenue growth, partially supported by 4% growth in organic order intake and also contribution from our more recent acquisitions. The growth in revenue fed through to profit, and adjusted operating profits were GBP 14.3 million, up by 16%, and a similar percentage increase to earnings per share with adjusted earnings per share progressing to 141.4p.

The improvement in financial performance was driven by the delivery of a coring contract with Geotek and expedition earlier this year, which we delivered in the first half. And also, if you look at Geotek as a whole, better performance across it. However, if you take Geotek's performance out of our results, the rest of the organic businesses went backwards by 1/3. And I'll show you the effect of this illustrated after the profit bridge slide a little bit later.

Moving from P&L to cash flows. And we -- our group, over its history, has had a strong track record of turning profit into cash. And we generated GBP 12 million of cash from operations with a cash conversion of 87%. And it's pleasing that we're going back to historical norms, and I'll come back to this a little bit later about cash conversion, but also about working capital where we still recognize there's some work to do. But our cash conversion served to support our policy of providing shareholders with progressively increasing dividend returns, and we've increased the interim dividend to 32.7p per share. That's up 10%. It's our minimum increase given the weaker performance. And our cash generation also supported reduction in our net debt, and adjusted net debt reduced from GBP 51.7 million at the year-end to GBP 45.7 million at the end of June.

Gearing or leverage was 1.5x, down from 1.7x at the year-end. And we have significant headroom -- continue to have significant headroom in our covenants and a strong balance sheet. So looking at the rest of '25, and it's clear we still have some work to do to deliver the rest of the year, but it's primarily related to execution of delivery rather than needing lots of orders. But we continue to have tricky trading conditions, particularly in the U.S. Global geopolitical and economic conditions remain uncertain and also unpredictable. We have lots of work still to do to ensure that we can end this year in a good position to start next year.

So moving on to the next slide. Having talked through most of the performance, just going to touch on two things. One on tax, where our effective rate on adjusted earnings is 23%. U.K.'s headline corporation tax rate of 25%, partially offset by those of our businesses now in the Patent Box regime. And as a quick reminder for everyone in relation to R&D tax scheme, we're in the large company scheme, which really means that it's less effective than it was when we were small in the SME scheme and also most of those benefits end up in operating profit. And then lastly, for those of you not as familiar with our P&L, we do have adjusting items that take to the statutory results, the largest of these being GBP 5 million noncash amortization of the intangible assets that we're required to recognize when we acquire businesses.

And moving on to the next slide, please. And really key for our business is order intake, and we share every year a graph with you showing what we look at every week. So just to quickly walk you through it, there's three lines on it. There's a red line, a black line and a green line. The red line is our internal sales budget, which we set internally every year as part of our budgeting process. That's our target. The end of the graph is the end of June this year. The black line then which we're aiming to be meeting if we can by the end of the year. The red line is our trailing 12 months of orders, and the green line is the last 4 months of orders multiplied by 3, so annualized. And that is a much shorter-term measure, it's a lot more jagged. What we're hoping for from that is for it to at least be touching and hovering around the red line so we've got maximum capacity.

So what actually happened in the period? And actually, it's important to take you back to the start of the second half last year. And what you can see is we started with momentum increasing both at the black and the green line from July last year, and it kept going. And you can see the black line ticking up quite nicely, almost in a nice straight line as we got into this year, as we got to the end of Q1, but then it stopped as we get to Q2. And you can see the drop off towards the end of the graph where the effect of the reductions in funding in the U.S. started to hit us and consequently, why organic order intake was only up by 4%.

And since the end of the first half through July and August, organic order intake is now flat compared to the comparative period. And that's not a great picture because really what they're saying is we've gone from plus 4% to 0 in the last 2 months, really driven by events in the U.S. If there's any high spot in this, any positive -- positivity, you can see that we were up by 120% in China. But sadly, the U.S. has sort of covered over that.

And moving on to the next slide. And I said I'll come back to this later. So this slide really reconciles between the first half EBIT contribution of our businesses before central costs for '24 versus '25. So reconciling between these, you can see there's a big improvement in organic growth in the period, largely supported by Geotek, but at the same time, a chunky drop in organic performance as a consequence of some of our other businesses. And Tim and Ian will talk through a little bit about some of the things we're going to be -- are going to be doing or doing at the moment in relation to writing this. The last little block, the effect of post -- of the acquisitions that are not in the organic group. Overall, not the picture we expected at all at the start of this year.

And moving on to the next slide, balance sheet and cash flows. Really two things I want to quickly pick up. One is, as I said before, cash conversion. We've had a good first half for cash conversion, 86%, which on the face of it may look a little bit lower than our usual target of 90-plus percent. But I need to take you back to last year first when cash conversion for the full year was 122%, and that was inflated a little bit by the advanced payment on the Geotek coring expedition. Without that advanced payment, we would have been at about 104%, 105%. So a good year for us for cash conversion.

The same thing applies from the unwinding of that advanced payment in the first half this year. So that 86% is actually more than 100%. So for the last 18 months, we've had typical good Judges cash conversion. And having said a year or so ago, we need to make sure we're focused on this. The businesses have responded and we've delivered that well. So that is back to normal for us, something we'll keep continuing to focus on, but it's an important thing that we've kept going over the last 18 months.

Now what isn't yet better is working capital as a whole. And we've always had our own target of working capital being 10% of annual revenue. It's now more like 20%, but quite a bit of work has gone on. David mentioned Mark now doing some cross-group work, and he started work with all of the businesses and Operations Director about getting more granular information for our inventory, and we believe there's some good opportunities to start bringing this down. And I'm sure Tim and Ian will touch on a bit more of this later as well.

In terms of net debt, we've reduced our debt a little bit in the period. That's because we've been able to pay the bank back from some of the cash generation. The leverage reduced to 1.5x. We've got significant headroom on our covenants. We have significant available funds to be able to use out of our facility, and we continue to have strong support from our banking group of Lloyds, Santander and most recently, HSBC, who joined the group post period end. I mentioned in my CFO report at the end of last year that we need to make a change because Bank of Ireland, who were our third member of the banking group, we were pulling out of U.K. lending. And HSBC, I'm pleased to say, have stepped in to take over that debt. Overall, we have significant firepower for the foreseeable future from our banking facilities to enable us to acquire the right businesses for our group despite the fact that we haven't bought any in the period year-to-date.

So moving on to the next slide. Return on total invested capital, another key measure for us. And very quickly to walk you through the graph, ROTIC is an important measure for us. It's a function of the multiples we pay for the businesses we acquire in the purest form. You start on the left-hand side with FTT when we acquired it for a little less than 5x to close to 20%. Growing ROTIC thereafter requires improved financial performance and/or buying businesses at lower multiples.

As you go across the graph, three key points to look at: GDS, Scientifica and Geotek acquisitions, which are big acquisitions for us, we paid 6x and 7x, respectively. But smaller acquisitions affect ROTIC minimally now. And through the period for the last 6 months, we've improved ROTIC to 17.9% from 16.5% at the year-end. It's not where we want it to be, we want it back above 20%. We'll work hard to ensure we do that and ideally keep working on pushing that in the direction of 30%, where we really, really believe if the group is performing as well as it should be able to, that we can get to that over the long term.

So moving on to the next slide, an ultimate one on diversification. Quickly going across from left to right, you can see the first pie chart, the split of all our businesses by revenue, and there's no single company that overly dominates. We manufacture scientific instruments with different end markets. And so we're diversified by scientific application. We sell across the world, more than 85% of our revenue we export, and there's no single country or region that overly dominates. But it's useful to see in this period, the effect of the contraction in North America and also the better period we had in China. And then lastly, on the right-hand end, the analysis by end market, geotechnical part, the orange part is usually around 25%, the consequence of the first half and Geotek performing particularly well, including the coring expedition means that, that wedge is a bit bigger than usual.

So going on to my final slide, please. And this summarizes some key financial metrics about the long-term success of the group and revenue and profits. Earnings per share have all grown strongly over the history of our group. And despite our more recent subdued trading, we still have compound growth in revenue on an organic basis of more than 7% and the related EBIT growth of more than 9%. Dividends have grown by at least 10% per annum over the history of the dividend. And compound growth in the dividend remains above 20% with an increase of 10% to the interim dividend to 32.7p. And our focus on cash generation and cash conversion ensures we're able to quickly reduce our acquisition debt, make space for more acquisitions, fund that progressively increasing dividend for shareholders and weather more challenging economic conditions like we're going through at the moment.

And on that note, I'm going to pass back to David.

Thank you very much, Brad. And next, we talk about group strategy. And the next slide is just repeating what we said before. It's based on M&A, buying the right companies at the right price and organic growth. Of course, as we grow and we have more companies, organic growth becomes a much more key element of our growth.

Next slide, we're going to talk very quickly about acquisitions, mostly because we didn't do any one in the beginning of the year. Next slide, please. But I just want to repeat what it is that we're trying to do. First, a strict acquisition discipline. So we want to buy companies which are strong exporters in global niches. Niche companies are the target that we're following and that need to have solid EBIT margin and a lot of export. These companies tend to generate a lot of profits and cash flow. We've been historically paying 3 to 7x EBIT. And on average, we've been paying 5x. So as -- if they're bigger, we have to pay more. The 3x and the 7x are unusual ones, outliers. But apart from these two deals, it was 4 to 6x. So this is very important in the building of shareholder value to pay moderate prices for these acquisitions.

We're borrowing up to 3x EBITDA. And historically, we've paid 3% to 8%. Recently, it's been a bit higher, but not as high as 8%. And of course, when we did the Geotek deal, we had a very good hedge before interest rates started to explode. So deals are long to incubate. We have to pursue companies for a long time. It's very erratic. Are they crystallized? Some yes, we do nothing. A year, we did four. We're very honorable in the process. We never renegotiate, and we don't try to screw the sellers. And I think people are more and more conscious of the fact that a deal could be good for both parties. And we offer the sellers financial certainty. So we always finance -- we have always financed the -- secured the finance before we actually sign heads of agreement. And of course, we do the deal and we reduce the debt with the cash flow, which is generated from this deal and other deals we've done before, and we invest in further deals. So it is a very simple business model.

So we're trying to really increase the rhythm of acquisitions. We realize we have to look a bit beyond the U.K. And this is -- this desire to enhance this activity has led to the recruitment on 1st of July of Rik Armitage, who's very experienced. He is around 60. He's spent a lot of time as a consultant doing acquisitions. And then with Chemring and Oxford Instrument, and he's very experienced. And he's really understood very quickly what is the thing which has made Judges successful in its M&A program. And I'm sure he's a very essential recruitment for us.

Next slide is going to talk about organic growth. And I'm passing on to Tim and also to Ian to deal with the description of what we're doing to promote organic growth within the group.

Yes. So hello, everyone. Tim and I were going to take the next section, a bit sort of double headed. So I'm going to take this first slide, and then we've got some specific examples after that. Next slide, please. So this is a bit more sort of granular detail about how we manage our group, our 20-plus businesses and the role of the center, so all of Tim and myself in the center, encouraging best practice. So if we focus first on the left-hand side, the left-hand side is really about the companies themselves, so individual things that are there, which I'll go through in a second. And the right-hand side is the role of the center and the roles that we play to encourage best performance and deliver organic growth.

Now if we focus on the top left-hand point first, the strong leadership teams. And arguably, this is the most important point on the slide. I often think that if there's one thing I do right, it's getting the right MD in place in each of our businesses. Our autonomous model, which we've obviously talked about on many occasions is critical therefore, to have the right leadership in place. And these jobs are great jobs. These are jobs where you run your own ship, you're in charge of your own strategy, your own P&L. Don't need to worry about doing the payroll at the end of the month. But other than that, you're running your own ship. And that gives -- that attracts great talent, people who have an entrepreneurial mindset and really want to grow things. So ensuring we have the right leaders is absolutely essential.

The second point is we obviously have good robust governance and financial controls. Clearly, the usual financial ones and financial metrics, but also obviously, other governance around health and safety, for example, or export control. But I want to emphasize here that we're very careful to make sure it's as light touch as possible. We do not want to encumber our businesses with big processes and over-administration. We want them to focus on growing their businesses, concentrating on their customers. So we really do focus on giving -- making sure it's as light a touch as possible and governance regime.

And then the third point is really making sure that not only have you got the right MD in place, you've got the right strong leadership teams locally across all of the functions you need: sales and marketing, engineering, product development, operations and so on. And we work very closely to make sure that we've got the right capability locally. Now that then talks to the middle, which obviously the autonomy point that I've made, very important. But equally is the other side of the coin, which is accountability to us, a group. So there's a -- we emphasize the responsibility these MDs have in short, running their own ship, absolutely, but they are accountable for their performance to a group.

Then on the right-hand side, really just focusing on some of the things that Tim and I do. Obviously, we're looking -- from a helicopter view, we can see a much wider view of the performance and look at what fabulous talent we have and fabulous experience we have across multiple different businesses. And leveraging this group-wide experience, maybe somebody's got a particular industrial sector experience or maybe somebody's got a particular expertise in operations or some aspects of that where we can really leverage this and share best practice across the group. And we pull together sales leaders, operations leaders, finance leaders together frequently to share best practice and create a community of best practice. That then leads on to the second point, which is clearly promoting excellence and examples there.

And then the final point I'd make on encouraging ambition. We're just actually through the annual strategy cycle where we require each business to produce an ambitious 3-year visionary strategy as to where they want to grow the business to. And we found a very motivational process, and then really getting people to go away from the day-to-day and focus on where that business will be in 3 years' time. And I think summing all that together is we would give us clearly a long-term focus, but we genuinely believe sustained advantage.

Tim, do you want to add anything to that slide?

Yes. I think the only things that I'd layer on there, another way I look at it, to emphasize your point, I think, around the autonomy aspect being so fundamental to our group, so fundamental to how we operate. But it shouldn't be something which is seen as automatic. It has to be seen as something which is earned, and it's earned by making sure that the things on the left-hand side, which, as Ian said, they're the company-specific things. But they're kind of the fundamentals, they're the health side of things. Those things absolutely need to be in place to make sure that we've got a healthy business and that healthy business is delivering in the short term.

And with those things assumed, that's what enables autonomy and the accountability that comes out of that. And of course, then if that's in place, we get to -- we earn the right to spend the majority of our time on the right-hand side, which is then all about, as Ian said, the ambition and turning that ambition into a long-term focus and the sustained advantage, which is really fundamental to us.

So the next four slides are specific examples. And Tim, you're doing the first one. So next slide, please.

Yes. So I'll talk through this example. I know that we've highlighted earlier around how -- yes, the U.S. research funding has been an impact for us this year, but there's also been some other separate impacts, product-specific impacts and so forth. So we just wanted to go through just a few of the examples of issues that we are following up on and how we are addressing that.

So this first one is about diversifying long-term growth drivers. And I don't want to give the impression that something that's particularly new to us. In some sense, it's rather -- it is innate to our model. We are, to some extent, agnostic about the particular fields in which the companies we acquire play or all scientific instrument manufacturing companies are related to that. But clearly, we have exposure to geotechnology to semiconductor, life science, a whole sort of different set of market drivers. And when I sort of think about describing what might be a sweet spot for us about our businesses as scientific instrument manufacturers, manufacturers of peripherals for particular scientific techniques. And those scientific techniques are deployed in academic and industrial research.

But there is also a move where those scientific techniques become increasingly find application in other industrial processes. And so to use a reference earlier, you'll have seen on the graph that Brad displayed, we combine sales for life sciences and semiconductor. And you might think, well, that doesn't necessarily make sense, but there are significant overlaps in some of the scientific techniques that we sell to and how those things are deployed in those two quite different markets. So naturally, as an example, that -- the use of our products and services in one particular market then gains traction and gains exposure to growth drivers in another.

So this is something which is both a sort of natural part of our model, but it's also something that we are increasingly being more deliberate and ambitious around through the strategy process. So actually uncovering through our strategy process, what are those opportunities and how can we seek to accelerate and amplify those opportunities and gain a greater level of exposure to other growth drivers. So we continue to have the long-term sustained growth driver in research and industrial -- sorry, academic and industrial research as well as some industrial processes, and a greater level of exposure to industrial growth drivers.

Okay. Next slide, please. So this is a sales example. And as we've alluded to, it's never been more important when one of our main markets is under stress in the U.S. to make sure that we maximize our opportunities globally. Now as I'm sure everybody understands, the vast majority of our sales go through distribution channels, distributors, agents or OEMs. So therefore, best practice around managing these channels is super important to make sure we manage our existing ones. We make sure we change them if they're not performing. We make sure we're covered in all of the territories we want to be covered in.

So this is something we've been working very closely with on the -- with the sales leadership community, particularly around developing tools to manage distributors and agents better to benchmark their performance and if necessary, change them out. And so we've got some great examples of businesses which have changed distributors in China, and it's a great success. And that's, again, part of the reason we're up in China. And I should emphasize, the vast majority of our sales go through this channel. We've only really got direct employees in the U.S.

And really, the final point is, and this is from a personal perspective. We must emphasize that selling -- managing distributors and agents is a very different skill set to direct selling. And I think recognizing that and focusing on best practice partnership management is going to deliver good growth in the future.

The next slide, I think that's you, Tim.

Next slide, please, yes. So I'm going to talk a little bit about some of the product-specific challenges and how we've thought about -- how we've gone about addressing those things. Again, I don't want to give the impression that this is the first time that things like this have hit us. Of course, we're a portfolio of manufacturing businesses. There's always things going on in those businesses about various product-specific challenges to overcome. Maybe this year has been a year where there's been slightly more of those happening at the same time, which has been perhaps a little bit unusual for us and so something that we particularly commented on in the announcement in July.

A couple of examples then. I'd highlight the commitment to quality. We've had one or two examples of some quality -- of recurring quality issues here. And I think just important around leveraging group-wide experience, making sure we've got the right approach and right capability gaps around continuing to instill what I really regard as a culture of quality. So it's not just a person's role, it really is vital and fundamental to the whole company. And I think as we've grown our talent base of MDs and functional leaders that we brought into the organization, benefiting from a fresh set of eyes, fresh set of eyes and fresh experiences and the knowledge base that brings to reinforce the approaches made there.

And an example, which I'm sure will be familiar to many of you around different ways of addressing quality. We think about quality being inspected in. So you might manufacture lots of products, you inspect them at the end of the line, you throw away or rework the ones that don't work and you ship the ones that do work. And really, that's a last resort in some sense. That's not best practice, it's something which is a containment action at best.

The next best thing is to think about building quality in. So how do you have quality built in during the assembly process or the product manufactured in such a way that it's manufactured to a higher quality or can't be manufactured incorrectly. So a much better sort of short- to medium-term assessment. But actually, the far better solution in the longer term is to design quality in. So design the product in such a way that it can't go wrong in the first place that failure modes are absolutely -- they're removed, they're not there. And that is the basis, as everyone know, from root cause analysis. And so in terms of promoting excellence and leveraging group-wide experience, really bringing to bear experiences around the group when we have quality challenges like this on understanding what is the root cause and putting those root causes right. There's been several examples where we've really been able to make use of that capability around the group.

And another example, again, sort of fresh perspective coming in and seeing, okay, maybe we have an example of declining sales, why are sales declining and really understanding climbing inside that and realizing, look, maybe there is an issue with the product where there is a functionality or a capability in a specification that isn't what it needs to be. It doesn't meet market requirements. Then it's about hitting that requirement, either getting new capability in or addressing that with the required critical mass of engineering resource to actually make that change and to bring that product up to the required standard. And that's other areas of investment -- examples of other areas of investment that we've been making this year to improve the capability of some products to bring them back to the level where they are competitive. And, next slide.

Next slide, please, yes. So final slide on the organic section. As Brad alluded to, one of the things we are obviously always working on is improving working capital, but we've chosen to focus on it particularly this time. Just to give you a little bit of an insight to the work we're doing. With sort of 20-plus factories, you can imagine, obviously, we have a spectrum of performance around stock, inventory turns and so on. Some of our best factories, I would say, are very good. They've got turns between 3 and 4 and have very good performance. We naturally have a spectrum of those who are at the other end.

We still have some work to do there. So we're working across our operations teams with -- particularly within the operations leaders community, a bit of healthy competition. We've got league tables and so on. And I think there's considerable area we can improve to get the laggards up to the performance. But actually, in many cases, they had pre-COVID. My experience has been that whilst many businesses have returned to pre-COVID levels of inventory management stocks, there are still some that are hanging on to some excess stock, which definitely needs to be dealt with, and that's what we're doing. Okay, next slide.

David, this is back to you.

Thank you very much. Sorry, I did. Thank you very much, Tim and Ian, and we're going on to the outlook and investment case. Please change the slides. So the outlook, what we want to say is we've had a lot of turbulence in the last 2 years, mostly due to China and to the U.S. and also the timing of Geotek coring expeditions. But we -- I do firmly believe that the secular growth drivers are absolutely intact. And once these turbulences are over, we should get back to the typical growth of our sector, which is 7%, which we exceeded, by the way, in the run-up to -- in all the years which ended with COVID.

H2 started with solid order book. But of course, this order intake was poor over the summer, and this was really due to Americas. So we still have a problem there with the constraint in U.S. research funding. We're always wondering when our next coring exhibition -- expedition will take place. And we don't know and we will always update when we have certainty, but it could be in '26 or '27, and we don't know at this stage. We're working hard to restore the performance of those who are laggards within our group. And we're expecting the year to finish within the constraint of the market expectation, which has been in the market since July.

So next one, please, is the investment case. So why invest in Judges or why keep your investment in Judges? Well, we still have 100% belief in our drivers in the size of the deal pool and still low capital use, although it was much lower before, and we're working on it. We believe these are very, very strong factors of shareholder value creation. By the way, we're obsessed with shareholder value because that's our job. We pursue our model with great discipline, and we think it's very robust. We only do deals which are earnings enhancing. And we're quite diversified by geography and scientific application, which gives us excellent resilience when there's problems around.

And of course, we grow the dividend at least 10%. We've done this every year for the last 18 years, producing actually a compound growth of 22%. So basically, the message is if you have your shares, you don't need to sell them to make money, you just need to get this 10% compound or more over the years. And then we are going on to the next slide, which is questions and answers.

Thank you very much. We've had a number of questions pre-submitted and submitted live. The first one being, please discuss how Judges' processes and approaches have changed since Ian and Tim joined the group.

Okay. Thank you very much. So this is a question that I'm not answering, and I'm going to let Ian and Tim answer that one.

Do you want to take a first go at that, Ian?

Yes, go for it.

How have our processes and approaches changed? I think probably evolved is probably a better description, of course. Preceding us, Mark was with the group for some time. What I would highlight about the three of us, including Mark, is that by chance, we all happen to bring slightly different perspectives. So fundamentally, our role and until recently, Mark's role was chairing portfolios of companies within Judges.

Mark has naturally brought an operational perspective. Ian has naturally brought a commercial perspective, and I've naturally brought a sort of R&D and innovation perspective. So has dovetailed very nicely in terms of helping us to start to establish. What we're thinking of in some ways, we try not to use the word toolkit, but some sense of best practice, partly leveraging our own experiences, but more particularly leveraging the expertise and capability and knowledge that's around the group as well, and to help deploy that around the group and help highlight where are the pockets of excellence or areas of excellence that we can amplify and use elsewhere within the group.

So I think moving to sort of standardize that more and increase the use of that and slightly greater, more systematic, let's say, use of and leverage of that excellence around the group in various processes like the operation and stock planning process that we mentioned earlier, the working capital improvements, like the strategy development process and like some of the networks, including for sales that's led to some choices of distributors and sharing best practices around distributor management. Those are some examples of how things have changed.

Ian, I'm sure you've got...

Yes. I mean at one level, it's hard for me to answer because I wasn't here. But I would -- I think it's best to describe some of the approach that I'm taking. And really my excitement when I look at our business and our portfolio of businesses, I'm very much encouraging them to think about the growth opportunities they've got, the markets they're in, the market sizes, the market shares and where there are opportunities to grow. And what excites me is that there were many and just really working with them to help identify these growth opportunities that they've got.

Our next question is, how much of your revenue ultimately depends on grant funding or government-backed research budgets? And how sensitive is that to political cycles?

Well, thanks for the question. It's a really, really good one. I don't know whether I'm going to be able to answer it brilliantly, but I'll try my best. So we've always explained to shareholders that the sort of split of our revenue is in the region of around 50% to universities, around 1/3 to industry, and around 1/6, which is going to either sort of directly or indirectly to things like research institutes and government test houses, et cetera, neither industrial nor as such university research, but all doing research. So there is -- you could say there's -- in the region of 2/3 is affected by this. Again, if you look at the history of Judges over 20 years, there have been plenty of times when there've been austerity in certain governments and largesse in others throughout the history.

So generally, what's happened is we've ridden that sort of up and down wave, and we follow the money. And so if a particular country is usually quite difficult to trade in as a result of government belt tightening and therefore, reduction in the amount of funding that they're supporting their local universities with, then we've just gone elsewhere and follow the money. The challenge for us that we've got quite recently is that the U.S. is probably the biggest market on its own that this has happened. So what we're trying very hard to do is to ensure that we can spread ourselves a little bit better, and this is what Ian was talking about before, really. I don't know if anyone on the team wants to add anything else to that.

Next question. In an acquisition, how do you decide whether to keep the original management in place versus parachuting in new leadership?

Yes. So maybe I'll deal with this one. What I want to emphasize is the large majority of our acquisitions are companies where the owner, and often the Founder, wants to retire. We buy companies which are for sale where people have decided to sell. I know there's different models. Some groups prefer to buy companies which are not for sale, and they want to -- exactly this is the thing I want. But we believe in our model that paying moderate prices is a key to our success. And as a result of this, it's much better to buy companies which are for sale. And the main reason people sell companies is when they want to retire.

So either there'll be people who want to retire. Sometimes they want to stay. In one occasion, there's one who actually did stay and he was a bit younger and he's still with us. Often, they say they want to stay, but they don't really enjoy it. We never handcuff them. And we always tell them, even if you say you want to stay and you change your mind, we won't hold you to your promise because we think that if you're unhappy, you're not going to do a good job.

So largely, we don't keep the MD. The MD is a new person. So in the past, we've predominantly promoted people from within the company, and it was often the Sales Director tend to be very knowledgeable in the science because to sell these instruments, you have to be as knowledgeable as your client. And sometimes we need to train them a bit in other skills of management than the ones they had before. And usually, they have a good understanding of the scientific community that they're addressing.

So we've done this quite a lot, but it also happens that sometimes we have to recruit from outside. I don't like the word parachuting because it's not like we have loads of people in head office who are doing nothing and are looking for a job, and we -- suddenly, we find a job for them. But we have also -- there's one guy that we've used a lot as an interim before we can find somebody suitable. But it's not -- we're not parachuting. We try to promote, there's an American guy who was trying to do a big deal in the U.K. and he said there's always a number two wants to be number one. And this is often true. But in the end, we need to have a very good MD. So if there's nobody in there who we think have the skill or the potential, we'll recruit from outside.

David, I'll add to that, if I may, because I was going to make a similar remark about the word parachute, which I think has probably the unintended nuance of an emergency situation, right? And I mean, I think the key thing here is that in any negotiation to acquire a business, by the end of that negotiation, there can't be any surprises. it must be completely clear and obvious about what the intention is. And if the seller or current MD wishes to stay, then that will become very obvious through the conversation. And if we think that's the right thing, then that will be clear that it's the right thing by the end, by the time the acquisition is closed. And if it's not the right thing, either because they don't wish to stay or because we don't think it's right, then we will have planned accordingly during the acquisition process. So it's just -- it's also not that there's a sense of urgency, it's absolutely a planned and deliberate process during the acquisition.

Given your highly acquisitive model, how do you stress test the group if acquisition valuations rise sharply for a few years?

Well, we've had some periods where we found that we can find or complete acquisitions. We're always wondering whether values are going up. But all these periods have had an end. And we find that generally over the 20 years, values haven't gone up and down so much. I have to say, with the exception of 2009, which was a particularly good year. Undoubtedly, if multiples did go up in a strong and durable fashion, it would definitely affect our business model. And there's a time when we would have to actually turn the toe and say we can't. If we have to pay double the multiples we're paying, I think it would seriously jeopardize the way we're trying to create value for shareholders. But it hasn't been the case. So I think often, when we think maybe we're not paying enough is that we haven't found the right deals and we haven't managed to close them for various reasons. And often patience is a thing which deals with it.

David, again, just adding on to that, but it's something that you and us as a wider leadership team do monitor on a regular basis in terms of obviously, the covenants where we are relative to the covenants and what you think of as acquisition equity. And therefore, in essence, at least a model or a stress test of what we could, in principle, acquire relative to where we are with those covenants. So that is a sort of rolling assessment that we make.

Is there a point where you would consider spinning off some of the portfolio to crystallize value?

Well, I think no. It doesn't mean we would never sell anything because we recognize that we're human. So we've done 25 deals, we can't say is of equal quality all of them with a hindsight. And it's not impossible that at some point, we would sell companies, but we don't buy to sell. We buy companies with a belief we will want to keep them for always. And if we want to sell them is then that we've come to a different conclusion with hindsight. But it's also -- and then we would try to sell them after making sure they're in good condition. But of course, you could have changes in the market. You can imagine that you buy a company which is very niche and that with a passage of time, it becomes less niche and a lot of more competitors enter the market and your life becomes difficult. And it's not a company you want to keep, which really fulfills your expectation that you had when you started.

So selling companies is definitely something that's not part of our business model, but doesn't mean we would never do it. And spinning out in -- we could also imagine that we will become very big and too big and too cumbersome and we want to spin out part of our portfolio and create the different public companies, if that's what you had in mind. And so people would end up with two bits like Hansen did in the past, but I think we're very far from that. And you have to recognize that it would greatly increase the burden of a head office because then you need to have two head offices instead of one. So it's unlikely we will do it at this stage in the game. But if we became much, much, much, bigger than we are and it became cumbersome, it could happen.

The next question is, how do you see the risk of Chinese low-cost competitors undercutting your subsidiaries in export markets?

Yes. I see that there's definitely a big risk of Chinese competitor undercutting in the Chinese market. And I've talked about it quite a lot in the last 1.5 years that I think China has become a different market for us, which used to be super growth. But we feel it's no longer the same super growth that we had in the run-up to COVID. And one of the three reasons for that, the other two reasons being lower growth and a bigger emphasis on consumer consumption versus public investment. But one of the causes is by Chinese. China is a country which is evolving very fast. It's following to a degree, the Japanese model for after the war, started imitating people with low quality and then imitating people with good quality, and then doing better quality than everybody else, and then doing their own product and then doing their own research. This has been the path of Japan. And China is going through this path in an accelerated fashion. And there's already a lot of stuff that they're ahead of us.

And one of the examples, for instance, is electronic -- electric vehicles where they've made enormous advances in very little time. So yes, China is not a fantastic skill of making things in small quantities like we do. So they're better doing large quantities of things and selling them a very attractive value. But I have to say we are experiencing more Chinese competition. The Chinese competition is mostly in China, but I have no doubt that with the passage of time, we're going to have to compete with the Chinese everywhere.

And like we have to compete with Americans and Europeans. So this is going to be a growing feature of our business to have to compete with Chinese companies and outside markets. But at this point, it's mostly a problem in China. So we have a little bit of breathing space and we're still very competitive in China. We sell a lot in China, but it's going to get more difficult.

Tim and Ian, do you want to add something to that?

I was just going to add, David, I would less emphasize the low cost, really the point you're making. And we will increasingly see high-quality Chinese competitors coming to market. But as you say, we will compete against them against -- as we do against the Americans, the Germans, the Japanese at the moment.

Regulatory changes around laboratory equipment safety or environmental compliance, how exposed are you?

Can I have a volunteer to answer that question, please?

I'll add something. I'm not sure I can give a definitive response, but I'd say in many respects, we are positively exposed to that. We certainly have businesses that are involved in defining standards, standards bodies, and it's something that we're involved in and watch out for. So I'd say, if anything, those would be positive drivers for us on average rather than blockers. They tend to be things related to -- okay, it might slightly increase the amount of time it takes to bring a new product to market. But once the new product is in place, the barriers to entry are higher. So I'd say we have exposure to those metrics. But in a positive aspect, they tend to be tailwinds for us.

Thank you. And this will be the final question due to time. How should we think about the eventual alleviation of challenges in the U.S.? Are you seeing any changes in demand from the few high-profile universities that have publicly announced settlements with the administration? Do you see a scenario where things get worse before they get better?

Again, I need a volunteer to answer this one because I can't say that I know the difference, for instance, between Harvard and Columbia. So if any of you has any answer to that question, happy to hear it.

Yes. I mean I think the answer is I don't think we see any improvement just yet. Predicting anything with the current U.S. administration, I think, is quite difficult. But I would pick up a point, really just picking a point that Tim was focusing on earlier, where we do see growth opportunities in the U.S. are more industrial focused. So that pivot that Tim described to taking academic techniques into more industrial R&D environment, and the industrial R&D market is arguably 4 or 5x bigger than the academic market actually. So that pivot and the U.S. feature is big in that pivot for us, then that's a way of potentially continuing to grow our business now.

Thank you very much, Ian. So was this the last question?

It was indeed. I can hand back for closing remarks.

Thank you very much. I'd like to say thank you to Harry and his team. Thank you certainly to my colleagues for answering all the questions where I was a bit dry. But thank you mostly to all of you who attended this webinar. I need to say that we've had a difficult 1.5 years. Although we strongly believe that the growth of our business is driven by things which are still there and will be there for many decades. But it's unfortunate when we underperform for a period of time. And we've been -- I think we have a very good fundamental business, but it's subject to turbulence. Some of these turbulence are due, of course, to the impact of COVID and the fact that the governments throughout the world are basically bust.

If you look at the yield on 30-year bonds everywhere in the world, you realize the skepticism that people have in the ability of these governments to restore a bit of financial credibility. So this, when there was the pandemic, we said this would affect us. I'm sure it's affecting us. America is a mix of politics and finances also is affecting us at this point. So we are in a turbulent period, but we believe 100% in the solidity of our business model and that we have a future which is good.

So thank you to everybody for listening to us, and I hope we can deliver to you continuing shareholder value.

Thank you to the management team for joining us today. That concludes the Judges Scientific plc investor presentation. Please take a moment to complete a short survey following this event. The recording of this presentation will be available on Engage Investor. I hope you enjoyed today's webinar.