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. Questions are encouraged throughout this webinar and can be submitted via the Q&A box situated on the panel on the right-hand side of your screen. I'll now hand over to the management team to begin the presentation.
Thank you very much, and thank you everybody for attending. I will 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. 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. A lot of our instruments get sold to universities for the purpose of research. The other long-term driver is constant aspiration from everybody who does something to do it better. If it's something physical, then to optimize, you need to measure, and we sell these measurement instruments.
We believe these are secular drivers, and 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 UK, but we're not restricting ourselves to the UK. It means that every year there's quite a large number of companies needing to change hands, larger because people retire, and then low capital use. This looks a bit stranger. Why is it important to us? We're not doing your traditional buy and build, which is my shares on a multiple of 20 times, I buy your shares on a multiple of 10 times, and I've doubled my money. This is not what we're doing.
What we're doing is we're borrowing money from the bank, and typically we pay maybe five, six at this point, a bit more to borrow this money. We buy companies on a multiple on average of five times EBIT, which means we have a return of 20% on our money. You multiply your money maybe by four instead of two times. The trick is that you are not issuing a lot of... The reason we have created a lot of value for shareholders, which is something like 80 times since we started, if we include dividends, is because we only have doubled the number of shares since we finished our first acquisition. I think that has been a critical element of success for shareholder value creation. What we've done, we've done this 20 years. We've done 25 acquisitions only.
You don't need to do a lot of deals, but you need to do good deals at tolerable values. We've distributed dividends up to 8.6 times the admission price, which was £1. We've created growth of revenue of 20% compound per year and organic 7%. Organic 7% and EBIT has grown 26% compound and 9% organic. This is really what has worked. What makes this thing function is two things: M&A and organic growth. If you don't mind getting to the next page, please. This is the management team. Brad and me, Tim, we're in the room. Tim and Ian are also there with us in a virtual fashion. Mark, who has been our CEO for many years and has made us colossal progress over his tenure, is now on the path to retirement, which should happen in about a year.
He's fulfilling a number of important central functions for us in the improvement of our business. Rick, who just started on the 1st of July and is in addition to our management team of one, there's now an M&A team of one, and now we have two. We hope to increase the rhythm at which we manage to do acquisitions. Next slide, please. 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 Geotech Coring Expedition in Japan. That's a very profitable thing. We were very happy to start on the right foot in this year because it was January or February. We had a lot of deferred orders from last year, which was a difficult year, and a lot of things were late.
We started delivering all these orders which were late last year, with the exception of one which is now for 2026. We had a good recovery in China and Hong Kong, which is back to normal. We were severely affected by the U.S. research funding freeze. This has been a big disappointment. This year, which was supposed to be really starting very well, is now a disappointing year. Comparative, we had a weak comparative last year because the first half wasn't great. We're producing good results, but we see the weakness in order intake. We think our year is going to be disappointing compared to what we expected at the beginning of the year. We issued a trading statement in July, which means that there's no surprise now. Now we expect to be in line with market expectation. The big issue was obviously the U.S.
impact, but some other challenges have affected some of our businesses. 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. It's not the number of acquisitions we do, but doing the right one at the right price. We try to be always disciplined and patient about this. 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.
I'm passing on to Brad because, of course, this is an announcement about our results. Brad will take you through the results.
Thanks very much, David. If we can move on to the next slide, please. Thanks. Let me take you through the results. On the face of it, we've delivered a better set of figures compared with the disappointing first half last year. In fairness, they were well below our expectations at the start of the year. 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. The consequence of that is we had to reset market expectations in July. Looking at the results, total revenues are up 15% to £70 million. 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 £14.3 million, up by 16%, and a similar percentage increase to earnings per share with adjusted earnings per share progressing to £1.414. Improvement in financial performance was driven by the delivery of a coring contract for the Geotech Coring Expedition earlier this year, which was delivered in the first half. If you look at Geotech as a whole, there was better performance across it. However, if you take Geotech's performance out of our results, the rest of the organic businesses went backwards by a third. I'll show you the effect of this illustrated in the Profit Bridge slide a little bit later. Moving from P&L to cash flows, our group, over its history, has had a strong track record of turning profit into cash.
We generated £12 million of cash from operations, so the cash conversion was 87%. It's pleasing that we're going back to historical norms. 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. Our cash conversion served to support our policy of providing shareholders with progressively increasing dividend returns. We've increased the interim dividend to £0.327 per share. That's up 10%. It's our minimum increase given a weaker performance. Our cash generation also supported reduction in our net debt. Adjusted net debt reduced from £51.7 million at the year end to £45.7 million at the end of June. Gearing or leverage was 1.5 times, down from 1.7 at year end. We have significant headroom, continue to have significant headroom in our covenants and a strong balance sheet.
Looking at the rest of 2025, 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. 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. 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%. The U.K.'s headline corporation tax rate is 25%, partially offset by those of our businesses now in the patent box regime.
As a quick reminder for everyone in relation to the 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. Most of those benefits end up in operating profit. Lastly, for those of you not as familiar with our P&L, we do have adjusting items that take us to the statutory result. The largest of these is £5 million non-cash amortization of the intangible assets that we're required to recognize when we acquire businesses. Moving on to the next slide, please. Our key for our business is order intake. We share every year a graph with you, showing what we look at every week. Just to quickly walk you through it, there are 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 trading 12 months of orders. The green line is the last four months of orders multiplied by three, so annualized. 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 that we've got maximum capacity. What actually happened in the period, and actually, it's important to take you back to the start of the second half last year.
What you can see is we started with momentum increasing both the black and the green line from July last year. It kept going. You can see the black line ticking up quite nicely. It's in a nice straight line as we got into this year, as we got to the end of Q1. It stopped as we get to Q2. 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. Consequently, organic order intake was only up by 4%. Since the end of the first half through July and August, organic order intake is now flat compared to the comparative period. That's not a great picture because really what that's saying is we've gone from plus 4% to zero in the last two months, really driven by events in the U.S.
If there's any high spot on this, any positivity, you can see that we're up by 120% in China. Sadly, the U.S. has sort of covered over that. Moving on to the next slide. I said I'd come back to this later. This slide really reconciles between first half EBIT contribution of our businesses before central cost for 2024 versus 2025. Reconciling between these, you can see there's big improvement in organic growth in the period, largely supported by Geotech, but at the same time, a chunky drop in organic performance as a consequence of some of our other businesses. Tim and Ian will talk through a little bit about some of the things we're going to be doing, are doing at the moment in relation to righting this. The last little block, the effect of the 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. Moving on to the next slide. Balancing 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. I need to take you back to last year first when cash conversion for the full year was 122%. That was inflated a little bit by the advanced payment on the Geotech Coring Expedition. Without that advanced payment, we would have been at about 104%, 105%. A good year for us in cash conversion. The same thing applies from the unwinding of that advanced payment in the first half this year. That 86% is actually more than 100%.
For the last 18 months, we've had typical good Judges cash conversion. Having said a year or so ago, we need to make sure we focused on this. The businesses have responded and we've delivered that well. That is back to normal for us. It's something we'll keep continuing to focus on. It's an important thing that we've kept going over the last 18 months. What isn't yet better is working capital as a whole. We've always had our own target of working capital being 10% of annual revenue. It's now more like 20%. Quite a bit of work's gone on. David mentioned Mark now doing some cross-group work. He started work with all of the businesses and Operations Director about getting more granular information for our inventory. We believe there's some good opportunities to start bringing this down.
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 one and a half times. We've got significant headroom on our covenants. We have significant available funds to be able to use out of our facility. We continue to have strong support from our banking group of Lloyds, Santander, and most recently HSBC, who joined the group post-period. 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, were pulling out of UK lending. 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 yet to date. Moving on to the next slide. Return on total investor capital, another key measure for us. Very quickly to walk you through the graph, it's an important measure for us. It's a function of the multiples we pay for businesses we acquire in its purest form. You start on the left-hand side with FTT when we acquired it for a little less than five times for 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, Scientific, and Geotech acquisitions, which are big acquisitions for us.
We paid six, six times and seven times respectively. Smaller acquisitions affect ROTIC minimally now. Through the period for the last six 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 work hard to ensure we do that, and ideally, keep working and pushing that in the direction of 30% where we really, really believe if the group's performing as well as it should be able to, that we can get to that over the long term. Moving on to the next slide, my penultimate one on diversification. Quickly going across from left to right, you can see the first pie chart. It's a split of all our businesses by revenue, and there's no single company that overly dominates.
We manufacture scientific instruments for different end markets, and 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. 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. 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 Geotech performing particularly well, including the Coring Expedition, means that that wedge is a bit bigger than usual. Going on to my final slide, please. 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.
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 £0.327. Our focus on cash generation and cash conversion ensures we're able to quickly reduce our acquisition debt and 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. On that note, I'm going to pass back to David.
Thank you very much, Brad. Next, we'll talk about group strategy. The next slide is just repeating what we said before. You know, 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 in the beginning of the year. Next slide, please. I just want to repeat what it is that we're trying to do. First is strict acquisition discipline. We want to buy companies which are strong exporters in global niches. Niche companies are the target that we're following, and they 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 three to seven times EBIT, and on average, we've been paying five times. If they're bigger, we have to pay more. The three times and the seven times are unusual ones, outliers. Apart from these two deals, it was four to six times. It is very important in the building of shareholder value to pay moderate prices for these acquisitions. We're borrowing up to three times EBITDA, and historically, we've paid 3% to 8%. Recently, it's been a bit higher, but not as high as 8%. When we did the Geotech deal, we had a very good hedge before interest rates started to explode. Deals are long to incubate. We have to pursue companies for a long time. It's very erratic. Are they crystallized? Some years, we do nothing. Yeah, we did four. We're very honorable in the process.
We never renegotiate, and we don't try to screw the sellers. I think people are more and more conscious of the fact that a deal could be good for both parties. We offer the sellers financial certainty. We always finance, or we have always financed the security of the finance before we actually sign a heads-up agreement. 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. There's a very simple business model. We're trying to really increase the rhythm of acquisitions. We realize we have to look a bit beyond the UK. This desire to enhance this activity has led to the recruitment on 1st of July of Rick Armitage, who's very experienced. He's around 60.
He's spent a lot of time as a consultant doing acquisitions and then with Chemring and Oxford Instruments. 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. I'm sure he's a very essential recruitment for us. The next slide is going to talk about organic growth. 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.
Yeah, hello everyone. Tim and I are going to take the next section. It's a bit sort of double-headed. I'm going to take this first slide, and then we've got some specific examples after that. Next slide, please. 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, the role of Tim and myself in the center, encouraging best practice. If we focus first on the left-hand side, the left-hand side is really about the companies themselves, individual things that are there, which I'll go to in a second. The right-hand side is the role of the center and the roles that we play to encourage best performance and deliver organic growth. 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 operating model, which we've obviously talked about on many occasions, is critical. Therefore, to have the right leadership in place. 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. Other than that, you're running your own ship. That attracts great talent, people who have an entrepreneurial mindset and really want to grow things. 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. I want to emphasize here that we're very careful to make sure it's as light a 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. We really do focus on making sure it's as light a touch as possible, a governance regime. 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, marketing, engineering, product development, operations, and so on. We work very closely to make sure that we've got the right capability locally.
Now, that then talks to the middle, which obviously is the autonomy point that I've made, very important, but equally is the other side of the coin, which is accountability to us at Group. We emphasize the responsibility these MDs have in, sure, running their own ship, absolutely, but they are accountable for the performance to Group. 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 performance and look at what a fabulous talent we have and fabulous experience we have across multiple different businesses. Leveraging this group-wide experience, maybe somebody's got a particular industry or 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.
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. 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 three-year visionary strategy as to where they want to grow the business to. We found that a very motivational process. Really getting people to go away from the day-to-day and focus on where that business will be in three years' time. 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?
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. It shouldn't be something which is seen as automatic. It has to be seen as something which is earned. It's earned by making sure that the things on the left-hand side, which are, 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. With those things assumed, that's what enables autonomy and the accountability that comes out of that.
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 the long-term focus and the sustained advantage, which is really fundamental to us.
The next four slides are specific examples. Tim, you're doing the first one. Next slide, please.
Yeah, let's talk through this example. I know that we've highlighted earlier around, you know, 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. 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. This first one's about diversifying long-term growth drivers. I don't want to give the impression that it's something that's particularly new to us. In some sense, it's rather innate to our model. We are, to some extent, agnostic about the particular fields in which the companies we acquire play, are all scientific instrument manufacturing companies or related to that. Clearly, we have exposure to geotechnology, to semiconductor, life science, a whole sort of different set of market drivers.
When I sort of think about describing what might be a sweet spot for us, about our businesses are scientific instrument manufacturers, manufacturers of peripherals for particular scientific techniques. Those scientific techniques are deployed in academic and industrial research. There is also a move where those scientific techniques become increasingly, they increasingly find application in other industrial processes. To use a reference earlier, you were seen on a graph that Brad displayed. We combine sales for life sciences and semiconductor. 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. Naturally, as an example, the use of our products and services in one particular market then gains traction and gains exposure to growth drivers in another.
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. 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. 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. This is a sales example. As we've alluded to, it's never been more important when one of our main markets is under stress, 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. 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. This is something we've been working very closely with on the sales leadership community, particularly around developing tools to manage distributors and agents better, to benchmark their performance, and if necessary, change them out.
We've got some great examples of businesses which have changed distributors in China to great success. That's, again, part of the reason we're up in China. I should emphasize, the vast majority of our sales go through this channel. We've only really got direct employees in the U.S. The final point is, and this is from a personal perspective, we must emphasize that managing distributors and agents is a very different skill set to direct selling. I think recognizing that and focusing on best practice partnership management is going to deliver good growth in the future. Next slide, the thing I see, Tim.
Next slide, please. I'm going to talk a little bit about some of the product-specific challenges and how we've thought about or how we've gone about addressing those things. I don't want to give the impression that this is the first time that things like this have hit us. Of course, you know, 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. It's something that we particularly commented on in the announcement in July. A couple of examples there, I'd highlight the commitment to quality. We've had one or two examples of some recurring quality issues here.
I think just the important thing 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. It's not just a person's role. It really is vital. You rework the ones that don't work, and you ship the ones that do work. 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. 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? A much better sort of short to medium-term assessment. Actually, a far better solution in the longer term is to design quality in.
Design the product in such a way that it can't go wrong in the first place, that failure modes are absolutely, you know, they're removed, they're not there. That is the basis, as everyone knows, from root cause analysis. 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 have been several examples where we've really been able to make use of that capability around the group. Another example, again, sort of fresh perspective coming in and seeing, okay, maybe we have an example of declining sales. Why are sales declining?
Really understanding, climbing inside that and realizing, look, you know, maybe there is an issue with the product where there is a functionality or a capability in the specification that isn't what it needs to be. It doesn't meet market requirements. 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. These are 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.
Next slide, please. Yeah. Yeah, 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, you know, are very good. You know, they've got turns between three and four and, you know, 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. We are working across our operations teams, particularly within the operations leaders' community. A bit of healthy competition.
We've got league tables and so on. I think there's a considerable area we can improve to get the laggards up to the performance that actually, in many cases, they had pre-COVID. In my experience, it's been that whilst many businesses have returned to pre-COVID levels of inventory management stock turns, there are still some that are hanging on to some excess stock, which definitely needs to be dealt with. That's what we're doing. Okay, next slide.
David, this is back to you.
You're on mute, David.
Thank you very much. Thank you very much, Tim and Ian. We're going on to the Outlook and investment case. Please change the slides. The Outlook, what we want to say is we've had a lot of turbulence in the last two years, mostly due to China and to the U.S. and also the timing of Geotech Coring Expeditions. I do firmly believe that the secular growth drivers are absolutely intact. 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. Of course, this order intake was poor over the summer. This was really due to America. We still have a problem there with the constraint in U.S. research funding.
We're always wondering when our next Coring Expedition will take place. We don't know. We will always update when we have certainty. It could be in 2026 or 2027. We don't know at this stage. We're working hard to restore the performance of those who are laggards within our group. We're expecting the year to finish within the constraint of the market expectation, which has been in the market since July. Next one, please, is the investment case. Why invest in Judges or why keep your investment in Judges? 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. 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. We're quite diversified by geography and scientific application, which gives us excellent resilience when there's problems around. 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%. 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. We're 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. Thanks.
Thank you very much. This is a question that I'm not answering. I'm going to let Ian and Tim answer that one.
You want me 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, and we're our 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. I know 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. I've naturally brought a sort of R&D and innovation perspective. Those are 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 you know 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. To help deploy that around the group and help highlight, you know, where are there pockets of excellence or areas of excellence that we can amplify and use elsewhere within the group. 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.
Yeah, I mean, at one level, it's hard for me to answer because I wasn't here. I think it's best to describe some of the approach that I'm taking. 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 their opportunities to grow are. What excites me is there are many. Just really working with them to help identify these growth opportunities that they've got.
Thank you. Our next question is, how much of your revenue ultimately depends on grant funding or government-backed research budgets? How sensitive is that to political cycles?
Thank you 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. We've always explained to shareholders that the sort of split of our revenue is in the region of around 50% to universities, around a third to industry, and around a sixth, which is going either sort of directly or indirectly to things like research institutes and government test houses, et cetera. Neither industrial nor as such university research. We're all doing research. You could say this in the region of two-thirds is affected by this. If you look at the history of Judges Scientific PLC, over 20 years, there's been plenty of times when there's been austerity in certain governments and largesse in others throughout the history.
Generally, what's happened is we've ridden that sort of up and down wave, and we followed the money. 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 they're supporting their local universities with, then we've just gone elsewhere and followed the money. The challenge for us that we've got quite recently is that the US is probably the biggest market on its own that this has happened. What we're trying very hard to do is to ensure that we can spread ourselves a little bit better than this is what Ian Wilcock was talking about before already. I don't know if anyone in the team wants to add anything else to that.
Yeah, thank you very much, Brad.
Perfect. Next question. In an acquisition, how do you decide whether to keep the original management in place versus parachuting in new leadership?
Yeah, 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. We believe in our model that being moderate prices is the key to our success. As a result of this, it's much better to buy companies which are for sale. The main reason people sell companies is when they want to retire. There tend to be people who want to retire. Sometimes they want to stay. On 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. Largely, we don't keep the MD. The MD is a new person. In the past, we've predominantly promoted people from within the company, and it was often the Sales Director. They tend to be very knowledgeable in the science because to sell these instruments, you have to be as knowledgeable as your client. Sometimes we need to train them a bit in other skills of management than the ones they had before. Usually, they have a good understanding of the scientific community that they're addressing.
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 find a job for them. We have, you know, also, there's one guy that we've used a lot as an interim before we can find somebody suitable. 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 UK, and he said there's always a number two who wants to be number one. This is often true. In the end, we need to have a very good MD. If there's nobody in there who we think has the skill or the potential, we'll recruit from outside.
David, I'll answer 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? 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. If the seller or current MD wishes to stay, then that'll become very obvious through the conversation. If we think that's the right thing, then that'll be clear that it's the right thing by the end, by the time the acquisition is closed. If it's not the right thing, either because they don't wish to stay or because we don't think it's right, we will have planned accordingly during the acquisition process.
It's not that there's a sense of urgency. It's absolutely a planned and deliberate process during the acquisition.
Thank you very much, Tim. Next question.
Perfect. Given your highly acquisitive model, how do you stress test the group if acquisition valuations rise sharply for a few years?
We've had some periods where we've found that we couldn't find or complete acquisitions. We're always wondering whether values are going up. All these periods have had an end. 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. There's a time when we would have to actually throw in the towel to 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. It hasn't been the case.
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. Often, patience is the thing which deals with it.
David, again, just adding on to that, 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. 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. That is a sort of rolling assessment that we make.
Thank you, Tim. Next question.
Perfect. Is there a point where you would consider spinning off some of the portfolio to crystallize value?
I think no. It doesn't mean we would never sell anything because we recognize that we're human. We've done 25 deals. We can't say, is there of equal quality all of them with hindsight. 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. If we want to sell them, it's then that we've come to a different conclusion with hindsight. It's also possible, and then we would try to sell them after making sure they're in good condition. Of course, you could have changes in the market. You could imagine that you buy a company which is very niche, and that with the passage of time, it becomes less niche and a lot more competitors enter the market, and your life becomes difficult.
It's not a company you want to keep, which really fulfills your expectation that you had when you started. Selling companies is definitely something that, it's not part of our business model, but doesn't mean we would never do it. Spinning out, we could also imagine that we become very big and too big and too cumbersome, and we want to spin out part of our portfolio and create different public companies, if that's what you had in mind. People would end up with two bits like Anderson did in the past. I think we're very far from that. 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.
It's unlikely we will do it at this stage in the game, but if we became much, much, much, much bigger than we are and it became cumbersome, it could happen.
Thank you. The next question is, how do you see the risk of Chinese low-cost competitors undercutting your subsidiaries in export markets?
I see that there's definitely a big risk of Chinese competitors undercutting in the Chinese market. I've talked about it quite a lot in the last year and a half that I think China's 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. One of the three reasons for that, the other two reasons being low growth and a bigger emphasis on consumer consumption versus public investment. One of the causes is that China is a country which is evolving very fast. It's following, to a degree, the Japanese model after the war. It 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. There's already a lot of stuff that went ahead of us. One of the examples, for instance, is electric vehicles, where they've made enormous advances in very little time. Yes, China is not a fantastic skill of making things in small quantities like we do. They're better doing large quantities of things and selling them at very attractive value. 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, like we have to compete with Americans and Europeans. This is going to be a growing feature of our business to have to compete with Chinese companies in outside markets.
At this point, it's mostly a problem in China. 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. You know, we will increasingly see high-quality Chinese competitors coming to market. As you say, we will compete against them as we do against the Americans, the Germans, the Japanese at the moment.
Thank you very much, Ian. Next question.
Thank you. 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 answer on that. I'm not sure I can give, you know, 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. I'd say, if anything, those would be positive drivers for us on average rather than blockers. They tend to be things related to, you know, it might slightly increase the amount of time it takes to bring a new product to market, but once a new product is in place, the barriers to entry are higher. I'd say we have exposure to those metrics, but in a positive aspect, they tend to be tailwinds for us.
Thank you. 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 between Harvard and Columbia. If any of you has any questions, happy to hear it.
Yeah, I mean, I think as your answer is that I don't think we see any improvement just yet. Predicting anything with the current U.S. administration, I think, is quite difficult. I would pick up a point, really just picking up a point that Tim was focusing on earlier. Where we do see growth opportunities in the U.S. are more industrial-focused. That pivot that Tim described to taking academic techniques into a more industrial R&D environment, and the industrial R&D market is arguably four or five times bigger than the academic market, actually. That pivots, and the U.S. features big in that pivot for us, then that's a way of, you know, potentially continuing to grow our business there.
Thank you very much, Ian. Was this the last question?
It was indeed. I can hand back.
Thank you very much. I'd like to say thank you to Harry, his team. Thank you certainly to my colleagues for answering all the questions where I was a bit dry. Thank you mostly to all of you who attended this webinar. I need to say that we've had a difficult year and a half, 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. It's unfortunate when we underperform for a period of time. I think we have a very good, fundamental business, but it's subject to turbulence. Some of this turbulence is due, of course, to the impact of COVID and the fact that governments around 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. When there was the pandemic, we said this would affect us. I'm sure it's affecting us. America is a mixture of politics and of finances also. This is affecting us at this point. 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. Thank you to everybody for listening to us. 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.