TIDMGHH
RNS Number : 5628P
Gooch & Housego PLC
09 June 2015
For immediate release 9 June 2015
GOOCH & HOUSEGO PLC
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2015
Gooch & Housego PLC (AIM:GHH) ("Gooch & Housego",
"G&H", the "Company" or the "Group"), the specialist
manufacturer of optical components and systems, today announces its
interim results for the six months ended 31 March 2015.
Financial Highlights
Period ended 31 March HY2015 HY2014 Change
-------------------------- --------- --------- --------
Revenue GBP38.9m GBP34.4m 13.1%
-------------------------- --------- --------- --------
Adjusted profit before
tax(1) GBP6.3m GBP5.1m 23.5%
-------------------------- --------- --------- --------
Adjusted basic earnings
per share (1) 19.3p 15.9p 21.4%
-------------------------- --------- --------- --------
Interim dividend per
share 3.0p 2.6p 15.4%
-------------------------- --------- --------- --------
Net cash GBP11.9m GBP2.3m GBP9.6m
-------------------------- --------- --------- --------
Statutory profit before
tax GBP5.1m GBP3.7m 37.8%
-------------------------- --------- --------- --------
Basic earnings per share 15.6p 11.0p 41.8%
-------------------------- --------- --------- --------
(1) Adjusted for amortisation of acquired intangible assets,
site closure costs, the impairment of goodwill and the gain on
bargain purchase in relation to Spanoptic Limited.
Highlights
-- Strong performance from industrial laser and telecommunications products
-- Adjusted profit before tax up 23.5% from GBP5.1m to GBP6.3m
-- Investment in R&D up 10%
-- Melbourne site closure completed and products transferred to other G&H sites
-- Net cash of GBP11.9 million at period end (2014: GBP2.3 million)
-- Solid order book of GBP34.6 million, up 5.8% since 30 September 2014
-- Performance improvement initiatives launched across G&H
-- Interim dividend increased by 15% to 3.0p
Mark Webster, Chief Executive of Gooch & Housego PLC,
commented on the results:
"Gooch & Housego has performed well in the first six months
of the financial year against a background of generally improving
market conditions. We remain focused on delivering our financial
goals through our twin strategies of diversification and moving up
the value chain. The new management team has put in place a
performance improvement programme prioritising operational
excellence, business development and R&D; it is progressing
well and will help underpin future performance."
For further information please contact:
Mark Webster / Andrew
Gooch & Housego PLC Boteler 01460 256 440
Mark Court / Gabriella
Buchanan Clinkard 020 7466 5000
Investec Bank plc (Nomad Patrick Robb / David
& Broker) Anderson 020 7597 4000
Operating and Financial Review
Performance Overview
In the six months to 31 March 2015, the business has once again
delivered sales growth and improving margins driven by a strong
performance in our Industrial division. In turn this has meant that
profit growth is strong for the period. Net cash has grown from
GBP8.7 million at the year end to GBP11.9 million as at 31 March
2015, in a six month period that has also seen Gooch & Housego
invest in inventory ahead of the scheduled Palo Alto facility move
to nearby Fremont and complete the closure of its Melbourne
facility. Our strong balance sheet underpins the increase in our
interim dividend by 15% and also reflects our confidence in the
business.
REVENUE
Six months ended 2015 2014
31 March
----------------- -----------------
GBP'000 % of GBP'000 % of
total total
----------------------- -------- ------- -------- -------
Industrial 22,313 57% 18,917 55%
Aerospace and Defence 10,314 27% 10,218 30%
Life Sciences 4,317 11% 3,608 10%
Scientific Research 2,001 5% 1,679 5%
----------------------- -------- ------- -------- -------
Group Revenue 38,945 100% 34,422 100%
Group revenue for the half year was GBP38.9 million, an increase
of GBP4.5 million, or 13% over the comparative period last year. On
a constant currency basis revenue was 10% higher.
In our Industrial segment, revenue was 18% up on the
corresponding period last year. This has been driven by strong
demand for both solid state and fibre optic lasers to service
micro-electronic materials processing applications.
Telecommunications has been the other major growth driver in
industrials, with crystal production for modulation systems being
supplemented by a surge in demand for under-sea telecommunications
components.
Aerospace & Defence revenue was flat, following strong
growth in recent years and continued strong sales of sub-assemblies
for defence applications. Whilst sales of navigation components for
the civil aerospace market remain buoyant, cost and price pressures
have reduced margins for this particular product. We continue to
remain optimistic about the growth potential for our core
capabilities in this sector.
Life Sciences revenues were up 20% compared with the same period
last year, driven mainly by an increase in demand for components
for laser surgery and laser treatment applications.
The Scientific Research market performed well in the period, up
19%, albeit from a low comparison base. This was driven by demand
for specialised crystal material used in nuclear fusion
research.
Order intake in the first half of the year has been encouraging.
The order book at 31 March 2015 was GBP34.6 million and the Company
has booked GBP39.7 million in orders since 1 October 2014.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating Net finance Taxation Earnings
Profit costs per share
-------------------- ------------------ ------------------ ------------------ ----------------
Half Year to 2015 2014 2015 2014 2015 2014 2015 2014
31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Reported 5,248 3,956 (148) (293) (1,363) (1,031) 15.6 11.0
Amortisation
of acquired
intangible assets 802 775 - - (209) (221) 2.5 2.3
Gain on bargain
purchase - (1,039) - - - - - (4.4)
Impairment of
goodwill - 1,538 - - - - - 6.5
Restructuring
costs 417 172 - - (108) (58) 1.2 0.5
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted 6,467 5,402 (148) (293) (1,680) (1,310) 19.3 15.9
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted profit before tax was GBP6.3 million, up 24% on the
prior year (H1 2014: GBP5.1 million). This reflects the increased
volume, particularly in the Industrial and Life Sciences
markets.
Operational and Strategy Review
Products and Markets - Industrial
Gooch & Housego's principal industrial markets are
industrial lasers, telecommunications, metrology, sensing and
semiconductor manufacturing. Industrial lasers are used in a
diverse range of precision material processing applications ranging
from microelectronics to automotive.
Business in our industrial laser market was excellent in the
first six months of the year, underpinned by good demand for our
acousto-optic components for fibre lasers and solid state lasers.
Sales of products into the industrial laser market in the six
months to 31 March 2015, were 18% higher compared with the
equivalent period last year.
The industrial laser market is continuing to evolve and grow,
driven by the success of the fibre laser. Gooch & Housego
anticipated these changes with the development of a family of
products for fibre laser applications, including the Fibre-Q, with
the result that the Company is now benefitting from these market
trends. Recent innovations have enabled Gooch & Housego to keep
up with the demanding requirements of this cost sensitive
application, paving the way for greater market penetration. In
other applications, most notably fibre-optic sensing, the Fibre-Q
is proving to be a key enabling technology that is now being
deployed by a number of our customers.
Whilst sales of products for fibre laser applications have been
growing steadily, demand for the traditional acousto-optic Q-switch
products remained solid, sales of which represented just 9% of our
total business during the period under review. A consequence of
these market dynamics is a consolidation in the variety of
acousto-optic products required to meet customer needs. In response
to these changes, and as a result of the steady improvements in
productivity, the decision was made in 2014 to close the Melbourne,
Florida, operation and to transfer the business to the Company's
Ilminster, UK, and Palo Alto, California, facilities. This process
is now complete. All product lines have now been transferred, the
site has been closed and the property sold. The closure of the
Melbourne site entailed a cash cost of $0.8 million and is expected
to deliver annual cash savings of $1.0 million.
In telecommunications, sales of lithium niobate wafers for
modulation applications continue to be a strong market. In 2015
this has been supplemented by strong demand for fibre optic
components for under-sea telecommunications applications. As a
result, the telecommunications market segment increased by 38%
compared with the equivalent period last year.
Products and Markets - Aerospace and Defence
The Aerospace & Defence market for Gooch & Housego is
characterised by high-value, long-term programmes involving the
main US and European defence contractors. During the first six
months of 2015, the Company has consolidated its position in the
Aerospace & Defence market. Gooch & Housego's precision
optics and acousto-optic technologies have contributed most to the
Aerospace & Defence markets in the last six months, with
navigation, range finding and target designation being the
principal applications.
This sector was flat for Gooch and Housego during the first six
months. With greater certainty and visibility on the US Defence
budget and the adoption of technologies which play to Gooch &
Housego's core capabilities, we believe there is strong growth
potential for us going forward. Investment in this area has taken
place.
Products and Markets - Life Sciences
Gooch & Housego's three principal Life Sciences revenue
streams are derived from diagnostics (fibre-optic modules for
optical coherence tomography (OCT) applications), surgery /
treatments (electro-optics and acousto-optics for lasers) and
biomedical research (acousto-optics for microscopy applications).
In each application area the Company is making steady progress in
moving up the value chain and is currently selling sub-systems as
well as components to several larger customers.
This market sector grew by 20% in the six months to 31 March
2015, compared with the equivalent period last year, driven mainly
by an increase in demand for components for laser surgery and laser
treatment applications.
The principal commercial application of OCT systems is retinal
imaging, and Gooch & Housego continues to be the leading
provider of fibre optic solutions (products and design services) to
this industry. Gooch & Housego considers OCT to be a growth
technology and is investing both in the development of new products
and in keeping its current products cost competitive.
Products and Markets - Scientific Research
The key application in Scientific Research is laser inertial
confinement fusion ("laser fusion"), where lasers are used to
create the conditions found in the core of a star. In addition to
pure research in high energy and plasma physics, these vast laser
systems are being used to investigate whether this technology could
provide clean, carbon-free energy to reduce dependency on fossil
fuels. Gooch & Housego is continuing to supply crystals for new
system construction and expects ongoing business to service
replacement and maintenance requirements.
Strategy
Gooch & Housego has developed, and measures itself, on a set
of strategies to deliver long term, sustainable growth for its
shareholders. These can be categorised into two broad pillars:
"Diversification" and, "Moving up the Value Chain". In seeking to
achieve its strategic goals management evaluates these long term
opportunities through short term strategies including investment in
R&D to deliver organic growth, acquisitions, market focused
business development and strategic partnerships.
R&D: In the first six months of the current financial year,
Gooch & Housego invested GBP3.2 million in research &
development. This represents 8.2% of revenue and is 10% higher than
the same period last year (2014: GBP2.9m).
Diversification: Gooch & Housego seeks to develop, through
R&D and acquisition, a presence in new markets that offer the
potential for significant growth as a result of their adoption of
photonic technology, whilst also reducing exposure to cyclicality
in any particular sector. In the current period Gooch & Housego
has grown its business in its core Industrial and Life Sciences
markets. Moreover, the business has continued to invest in its
quality systems and business development in order to strengthen its
position in these markets in the future.
Moving up the Value Chain: Gooch & Housego seeks to move up
the value chain to more complex sub-assemblies and systems through
leveraging its excellence in materials and components, and by
providing photonic design and engineering solutions for our
customers. This will enable Gooch & Housego to transition from
a components supplier to a solutions provider. A significant
proportion of our business in the Aerospace & Defence market
now comes from the sale of sub-systems rather than discrete
components.
As well as continuing to develop a leadership position in space
photonics, the STG is actively engaged in near-market developments
in OCT, fibre lasers and fibre optic sensing as the Company
leverages its components expertise to move up the value chain into
systems.
Performance Improvement Programme
In addition to its two core strategies, in 2015 the business has
identified three areas of focus as part of a performance
improvement programme. These are: a) ensuring a consistent level of
operational excellence across all sites, b) developing deeper ties
with key target customers and c) ensuring we have a balanced
R&D portfolio that meets the business's strategic goals. As
part of this initiative the Companyis in the process of moving its
Palo Alto site to nearby Fremont, which will provide improved
facilities and room for further growth. The transfer is expected to
be completed by the end of the financial year giving rise to a
non-recurring cost of GBP0.9m.
Acquisitions
Gooch & Housego will continue to evaluate acquisition
opportunities that have the potential to accelerate delivery of the
Company's strategic objectives. Having established a presence in
its target markets, Gooch & Housego is now focussing on moving
up the value chain in each of those markets. Whilst the business
will continue to evaluate bolt on businesses in our core component
technologies, continued strong focus is being placed on acquisition
opportunities that enhance the Company's ability to wrap
electronics and software around core photonic products to yield
system-level solutions.
Cash Flow and Financing
In the six months to 31 March 2015 Gooch & Housego generated
cash from operations of GBP5.8 million, compared with GBP4.9
million in the same period of 2014. 2015 operating cash flows
include a net cash outflow of GBP0.5 million relating to the
closure of the Company's Melbourne, Florida, facility.
As part of the preparations for moving its Palo Alto site to
nearby Fremont, the business is currently building inventory levels
to satisfy expected customer requirements while the new facility is
brought on line. The planned inventory build, together with the
impact of exchange rates and positive trading patterns, have
resulted in inventory levels increasing by GBP1.6 million to
GBP16.3 million since the year end. It is expected that some of
this additional inventory holding will unwind by the financial year
end. Capital expenditure on property, plant and equipment was
GBP1.1 million in the period (2014: GBP0.9 million). The main fixed
asset additions were in relation to expanding our Torquay
facilities and equipment to accommodate the Systems Technology
Group.
Since 30 September 2014, the Company's net cash position has
increased from GBP8.7 million to GBP11.9 million. On 14 November
2014, the Company re-financed its debt facilities with the Royal
Bank of Scotland (RBS). Gooch & Housego now has a committed
revolving credit facility of $15 million and an uncommitted
flexible acquisition facility of $20 million available until 30
April 2019. Upon inception of the new facility, all existing RBS
borrowings were repaid. At 31 March 2015, $8 million of the
revolving credit facility was drawn.
Staff
The Company workforce increased from 644 at 30 September 2014 to
664 at the end of March 2015. This increase was largely due to
recruitment of staff to support the Company's growth strategy.
Dividends
The Directors have declared an interim dividend of 3.0p per
share (2014 : 2.6p per share), a 15.4% increase on the prior
period, which is reflective of the Directors' confidence in the
Company's long term growth prospects, strong balance sheet and
healthy cash position. This will be payable on 20 July 2015 to
shareholders on the register as at 26 June 2015.
Prospects and outlook
Against a background of positive market conditions Gooch &
Housego is well placed to deliver continued growth in FY15 and
beyond, through our twin strategies of diversification and moving
up the value chain. These strategies will be supplemented by the
performance improvement programme aimed at driving operational
excellence, developing deeper ties with key customers and ensuring
we have a balanced R&D portfolio. Finally, the business has the
financial and management capacity to execute on acquisition
opportunities as they arise.
Gareth Jones Mark Webster Andrew Boteler
Chairman Chief Executive Officer Chief Financial Officer
9 June 2015
Unaudited interim results for the 6 months ended 31 March
2015
Group Income Statement Half Year Half Year Full Year
to to to
31 Mar 2015 31 Mar 2014 30 Sep 2014
Note (Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- -------------
Revenue 5 38,945 34,422 70,056
Cost of revenue (23,385) (20,960) (41,706)
-------------- -------------- -------------
Gross profit 15,560 13,462 28,350
Research and Development (2,921) (2,577) (5,160)
Sales and Marketing (2,687) (2,301) (4,498)
Administration (5,723) (5,179) (10,026)
Other income and expenses 1,019 551 (271)
-------------- -------------- -------------
Operating profit 5 5,248 3,956 8,395
Net finance costs (148) (293) (514)
-------------- -------------- -------------
Profit before income tax
expense 5,100 3,663 7,881
Income tax expense 6 (1,363) (1,031) (2,482)
-------------- -------------- -------------
Profit for the period 3,737 2,632 5,399
Earnings per share 7 15.6p 11.0p 22.5p
-------------- -------------- -------------
Reconciliation of operating profit to adjusted operating
profit:
Half Year Half Year Full Year
to to to 30 Sep
2014
31 Mar 2015 31 Mar 2014 (Audited)
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Operating profit 5,248 3,956 8,395
Amortisation of acquired
intangible assets 802 775 1,525
Restructuring costs 417 172 1,555
Gain on bargain purchase:
Spanoptic Limited - (1,039) (1,039)
Impairment of goodwill (including
CDI closure) - 1,538 1,538
-------------- -------------- ------------
Adjusted operating profit 6,467 5,402 11,974
-------------- -------------- ------------
Group Statement of Comprehensive Half Year Half Year Full Year
Income to to to 30 Sep
2014
31 Mar 31 Mar 2014 (Audited)
2015
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Profit for the period 3,737 2,632 5,399
Other comprehensive income
Fair value adjustment of interest
rate swap net of tax 16 5 58
Currency translation difference 2,871 (837) 90
-------------- -------------- ------------
Other comprehensive income /
(expense) for the period 2,887 (832) 148
Total comprehensive income for
the period 6,624 1,800 5,547
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2015
Group Balance Sheet 31 Mar 2015 31 Mar 2014 30 Sep 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Non-current assets
Property, plant and equipment 24,031 24,339 24,140
Intangible assets 21,312 20,697 20,668
Deferred income tax assets 2,797 3,462 3,114
-------------- -------------- ------------
48,140 48,498 47,922
Current assets
Inventories 16,304 13,976 14,663
Income tax assets 401 508 487
Trade and other receivables 15,690 14,106 13,005
Cash and cash equivalents 17,240 12,016 17,094
49,635 40,606 45,249
Current liabilities
Trade and other payables (13,591) (9,929) (11,829)
Borrowings (5,349) (7,972) (8,048)
Income tax liabilities (96) (131) (244)
Provision for other liabilities
and charges (389) (272) (447)
-------------- -------------- ------------
(19,425) (18,304) (20,568)
Net current assets 30,210 22,302 24,681
-------------- -------------- ------------
Non-current liabilities
Borrowings - (1,698) (360)
Deferred income tax liabilities (2,478) (2,536) (2,306)
Derivative financial instruments - (32) -
-------------- -------------- ------------
(2,478) (4,266) (2,666)
Net assets 75,872 66,534 69,937
-------------- -------------- ------------
Shareholders' equity
Capital and reserves
attributable to equity
shareholders
Called up share capital 4,812 4,760 4,774
Share premium account 15,515 15,420 15,420
Merger reserve 2,671 2,671 2,671
Hedging reserve (5) (74) (21)
Cumulative translation
reserve 2,101 (1,697) (770)
Retained earnings 50,778 45,454 47,863
-------------- -------------- ------------
Equity Shareholders' Funds 75,872 66,534 69,937
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2015
Statement of Changes in Share Share
Equity capital premium Merger Hedging Retained Total
account account reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- --------- ---------- ----------- ---------
At 1 October 2013 4,620 15,213 2,671 (79) 42,514 64,939
Profit for the period - - - - 2,632 2,632
Other comprehensive income
for the period - - - 5 (837) (832)
--------- --------- --------- ---------- ----------- ---------
Total comprehensive income
for the period - - - 5 1,795 1,800
--------- --------- --------- ---------- ----------- ---------
Dividends - - - - (950) (950)
Proceeds from shares issued 140 207 - - (120) 227
Fair value of employee services - - - - 122 122
Tax credit relating to share
option schemes - - - - 396 396
140 207 - - (552) (205)
At 31 March 2014 (unaudited) 4,760 15,420 2,671 (74) 43,757 66,534
At 1 October 2014 4,774 15,420 2,671 (21) 47,093 69,937
Profit for the period - - - - 3,737 3,737
Other comprehensive income
for the period - - - 16 2,871 2,887
--------- --------- --------- ---------- ----------- ---------
Total comprehensive income
for the period - - - 16 6,608 6,624
--------- --------- --------- ---------- ----------- ---------
Dividends - - - - (1,101) (1,101)
Proceeds from shares issued 38 95 - - (35) 98
Fair value of employee services - - - - 220 220
Tax credit relating to share
option schemes - - - - 94 94
--------- --------- --------- ---------- ----------- ---------
38 95 - - (822) (689)
--------- --------- --------- ---------- ----------- ---------
At 31 March 2015 (unaudited) 4,812 15,515 2,671 (5) 52,879 75,872
Unaudited interim results for the 6 months ended 31 March
2015
Group Cash Flow Statement Half Year Half Year Full Year
to to to 30 Sep
2014
31 Mar 31 Mar (Audited)
2015 2014
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Cash flows from operating activities
Cash generated from operations 5,771 4,905 15,298
Income tax paid (692) (582) (1,625)
-------------- -------------- ------------
Net cash generated from operating
activities 5,079 4,323 13,673
-------------- -------------- ------------
Cash flows from investing activities
Acquisition of subsidiaries
(net of cash acquired) - (5,532) (5,532)
Purchase of property, plant
and equipment (1,090) (853) (1,909)
Sale of property, plant and
equipment 631 88 26
Purchase of intangible assets (337) (74) (852)
Interest received 11 3 8
-------------- -------------- ------------
Net cash used in investing
activities (785) (6,368) (8,259)
-------------- -------------- ------------
Cash flows from financing activities
Drawdown of acquisition borrowing
facility 5,168 4,971 4,832
Repayment of borrowings (8,731) (1,704) (3,196)
Proceeds from issues of share
capital 98 123 105
Dividends paid to ordinary
shareholders (1,101) (950) (1,569)
Interest paid (178) (230) (569)
Net cash (used in) / generated
by financing activities (4,744) 2,210 (397)
-------------- -------------- ------------
Net (decrease) / increase in
cash (450) 165 5,017
Cash at beginning of the period 17,094 12,088 12,088
Exchange gains / (losses) on
cash 596 (237) (11)
-------------- -------------- ------------
Cash at the end of the period 17,240 12,016 17,094
-------------- -------------- ------------
Notes to the Group Cash Half Year Half Year Full Year
Flow Statement to to to
31 Mar 2015 31 Mar 2014 30 Sep 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Profit before income tax 5,100 3,663 7,881
Adjustments for:
- Amortisation of acquired
intangible assets 802 775 1,525
- Impairment of goodwill - 1,538 1,538
- Gain on bargain purchase:
Spanoptic Limited - (1,039) (1,039)
- Amortisation of other
intangible assets 88 79 164
- Depreciation 1,355 1,227 2,644
- Profit on disposal of
property, plant
and equipment - 25 21
- Share based payment obligations 220 122 361
- Finance income (11) (3) (8)
- Finance costs 159 296 522
-------------- -------------- -------------
Total adjustments 2,613 3,020 5,728
Changes in working capital
- Inventories (816) (104) (538)
- Trade and other receivables (1,160) 493 2,097
- Trade and other payables 34 (2,167) 130
Total changes in working
capital (1,942) (1,778) 1,689
Cash generated from operating
activities 5,771 4,905 15,298
-------------- -------------- -------------
Reconciliation of net cash flow to movements in net cash
Half Year Half Year Full Year
to to to
31 Mar 2015 31 Mar 2014 30 Sep
2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
(Decrease) / increase in
cash in the period (450) 165 5,017
Borrowings (5,168) (4,971) (4,832)
Repayment of borrowings 8,731 1,704 3,196
Changes in net cash resulting
from cash flows 3,113 (3,102) 3,381
Finance leases acquired - (257) (257)
Translation differences 92 (14) (157)
-------------- -------------- ------------
Movement in net cash in
the period / year 3,205 (3,373) 2,967
Net cash at start of period 8,686 5,719 5,719
Net cash at end of period 11,891 2,346 8,686
-------------- -------------- ------------
Analysis of net cash
At 1 Oct Exchange Non-cash At 31
2014 Cash flow movement movement Mar
2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------- ---------- ---------- --------
Cash at bank and
in hand 17,094 (450) 596 - 17,240
Debt due within 1
year (7,992) 3,193 (483) - (5,282)
Debt due after 1
year (320) 341 (21) - -
Finance leases (96) 29 - - (67)
--------- ----------- ---------- ---------- --------
Net cash 8,686 3,113 92 - 11,891
--------- ----------- ---------- ---------- --------
Notes to the Interim Report
1. Basis of Preparation
The unaudited Interim Report has been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards ("IFRS"), as adopted by the European
Union.
The Interim Report was approved by the Board of Directors and
the Audit Committee on 9 June 2015. The Interim Report does not
constitute statutory financial statements within the meaning of the
Companies Act 2006 and has not been audited.
Comparative figures in the Interim Report for the year ended 30
September 2014 have been taken from the Group's audited statutory
financial statements on which the Group's auditors,
PricewaterhouseCoopers LLP, expressed an unqualified opinion. The
comparative figures to 31 March 2014 are unaudited.
The Interim Report will be announced to all shareholders on the
London Stock Exchange and published on the Group's website on 9
June 2015. Copies will be available to members of the public upon
application to the Company Secretary at Dowlish Ford, Ilminster,
Somerset, TA19 0PF.
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 September 2014,
as described in those financial statements.
2. Application of IFRS
Adoption of new standards
During the current reporting period there were no new standards
or amendments which had a material impact on the net assets of the
Group. In addition, standards or amendments issued but not yet
effective are not expected to have a material impact on the net
assets of the Group. However, the Group is closely monitoring the
IASB projects on Contract Revenue recognition and the Lease
accounting overhaul as they could potentially have a material
impact on the Group's results.
3. Estimates
The preparation of interim financial statements requires
management to make estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgments made by management in
applying the Company's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 30 September
2014.
4. Financial risk management
The Company's activities expose it to a variety of financial
risks, market risk (including currency risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk.
The interim condensed consolidated financial statements do not
include all financial risk management information and disclosures
required in the annual financial statements and should be read in
conjunction with the Company's annual financial statements as at 30
September 2014.
There have been no changes to the risk management policies since
the year end.
5. Segmental analysis
Aerospace Scientific
& Defence Life Sciences Industrial Research Corporate Total
For half year to 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2015
Revenue
Total revenue 10,314 4,317 25,421 2,001 - 42,053
Inter and intra-division - - (3,108) - - (3,108)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
External revenue 10,314 4,317 22,313 2,001 - 38,945
Divisional expenses (8,993) (3,598) (16,716) (1,556) (589) (31,452)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
EBITDA(1) 1,321 719 5,597 445 (589) 7,493
EBITDA % 12.8% 16.7% 25.1% 22.2% - 19.2%
Depreciation and Amortisation (296) (164) (852) (70) (61) (1,443)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit before
amortisation of acquired
intangible assets 1,025 555 4,745 375 (650) 6,050
Amortisation of acquired
intangible assets - - - - (802) (802)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit 1,025 555 4,745 375 (1,452) 5,248
Operating profit margin
% 9.9% 12.9% 21.3% 18.7% - 13.5%
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Aerospace Scientific
& Defence Life Sciences Industrial Research Corporate Total
For half year to 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2014
Revenue
Total revenue 10,218 3,608 20,935 1,679 - 36,440
Inter and intra-division - - (2,018) - - (2,018)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
External revenue 10,218 3,608 18,917 1,679 - 34,422
Divisional expenses (8,460) (3,023) (14,591) (1,592) (222) (27,888)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
EBITDA(1) 1,758 585 4,326 87 (222) 6,534
EBITDA % 17.2% 16.2% 22.9% 5.2% - 19.0%
Depreciation and Amortisation (286) (129) (765) (45) (79) (1,304)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit before
amortisation of acquired
intangible assets and
impairment of goodwill 1,472 456 3,561 42 (301) 5,230
Amortisation of acquired
intangible assets and
impairment of goodwill - - - - (1,274) (1,274)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit 1,472 456 3,561 42 (1,575) 3,956
Operating profit margin
% 14.4% 12.6% 18.8% 2.5% - 11.5%
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
(1)EBITDA = Earnings before interest, tax, depreciation and
amortisation.
All of the amounts recorded are in respect of continuing
operations.
5. Segmental analysis continued
Analysis of revenue by destination
Half year Half year
to to
31 Mar 2015 31 Mar 2014
(Unaudited) (Unaudited)
GBP'000 GBP'000
------------- -------------
United Kingdom 7,400 6,807
America 17,144 14,604
Continental Europe 8,128 7,733
Asia-Pacific 6,273 5,278
38,945 34,422
------------- -------------
6. Income tax expense
Analysis of tax charge in the period
Half Year Half Year Full Year
to to to 30 Sep
2014 (Audited)
31 Mar 2015 31 Mar
2014
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
--------------
Current taxation
UK Corporation tax 562 526 1,446
Overseas tax 380 404 630
Adjustments in respect of prior
year tax charge - - (165)
-------------- -------------- ----------------
Total current tax 942 930 1,911
Deferred tax
Origination and reversal of temporary
differences 421 101 49
Adjustments in respect of prior
year deferred tax - - 504
Impact of tax rate change in 2013
to 20% - - 18
-------------- -------------- ----------------
Total deferred tax 421 101 571
Income tax expense per income
statement 1,363 1,031 2,482
The tax charge for the six months ended 30 March 2015 is based
on the estimated effective rate of the tax for the Group for the
full year to 30 September 2015. The estimated rate is applied to
the profit before tax.
7. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on
the profit for the period using as a divisor the weighted average
number of Ordinary Shares in issue during the period. The weighted
average number of shares is given below.
Half Year Half Year Full Year
to to to 30 Sep
2014
31 Mar 2015 31 Mar (Audited)
2014
(Unaudited) (Unaudited)
No. No. No.
-------------- -------------- ------------
Number of shares used for basic
earnings per share 24,041,328 23,864,426 23,984,536
Dilutive shares 373,847 125,595 213,581
Number of shares used for dilutive
earnings per share 24,415,175 23,990,021 24,198,117
-------------- -------------- ------------
A reconciliation of the earnings used in the earnings per share
calculation is set out below:
Half Year Half Year Full Year
to to to
31 Mar 2015 31 Mar 2014 30 Sep 2014
(Unaudited)
(Unaudited) (Audited)
p per p per p per
GBP'000 share GBP'000 share GBP'000 share
-------- ------- -------- ------- -------- -------
Basic earnings per share 3,737 15.6p 2,632 11.0p 5,399 22.5p
Adjustments net of income
tax expense:
Amortisation of acquired
intangible assets 593 2.5p 554 2.3p 1,144 4.8p
Goodwill impairment - - 1,538 6.5p 1,538 6.4p
Gain on bargain purchase:
Spanoptic Limited - - (1,039) (4.4)p (1,039) (4.3p)
Restructuring costs 309 1.2p 114 0.5p 1,467 6.2p
Total adjustments net of
income tax expense 902 3.7p 1,167 4.9p 3,110 13.1p
Adjusted basic earnings per
share 4,639 19.3p 3,799 15.9p 8,509 35.6p
-------- ------- -------- ------- -------- -------
Basic diluted earnings per
share 3,737 15.3p 2,632 11.0p 5,399 22.3p
Adjusted diluted earnings
per share 4,639 19.1p 3,799 15.8p 8,509 35.2p
------ ------ ------ ------ ------ ------
Adjusted earnings per share before amortisation and adjustments
has been shown because, in the opinion of the Directors, it more
accurately reflects the trading performance of the Group.
8. Dividend
The Directors have declared an interim dividend of 3.0 pence per
share for the half year ended 31 March 2015. This dividend has not
been accounted for within the period to 31 March 2015 as it is yet
to be paid.
Half Year Half Year Full Year
to to to 30 Sep
2014
31 Mar 2015 31 Mar (Audited)
2014
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Final 2014 dividend paid : 4.6p 1,101 - -
per share
2014 Interim dividend paid :
2.6p per share - - 619
Final 2013 dividend paid in 2014
: 4.0p per share - 950 950
-------------- -------------- ------------
1,101 950 1,569
-------------- -------------- ------------
9. Borrowings
The group's banking facilities with the Royal Bank of Scotland
comprise a committed revolving credit facility of $15m and an
uncommitted flexible acquisition facility of $20m both available
until 30 April 2019.
The revolving credit facility attracts an interest rate of
between 0.9% and 1.8% above LIBOR dependent upon the Company's
leverage ratio.
10. Called up share capital
2015 2014 2015 2014
No. No. GBP'000 GBP'000
---------
Allotted, issued and fully
paid
Ordinary share of 20p
each 24,062,036 23,797,999 4,812 4,760
------------- ------------- --------- ---------
11. Derivative financial instruments
Half Year Half Year Full Year
to to to
31 Mar 31 Mar 30 Sep
2015 2014 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Interest rate swap 7 96 27
-------------- -------------- ------------
Current liability portion 7 64 27
Non-current liability portion - 32 -
-------------- -------------- ------------
7 96 27
The notional principal amount of the outstanding interest swap
contract at 31 March 2015 was $2.25 million (2014: $6.75 million).
The swap contract expired on 1 April 2015 and has not been
renewed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSFFIAFISEIM
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