TIDMGHH

RNS Number : 3559A

Gooch & Housego PLC

07 June 2016

 
 For immediate release   7 June 2016 
 

GOOCH & HOUSEGO PLC

INTERIM RESULTS FOR THE SIX MONTHSED 31 MARCH 2016

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 2016.

Financial Highlights

 
 Period ended 31 March           HY2016     HY2015 
----------------------------  ---------  --------- 
 Revenue                       GBP38.4m   GBP38.9m 
----------------------------  ---------  --------- 
 Adjusted profit before         GBP5.6m    GBP6.3m 
  tax(1) 
----------------------------  ---------  --------- 
 Adjusted basic earnings 
  per share (1)                   17.0p      19.3p 
----------------------------  ---------  --------- 
 Net cash                      GBP12.3m   GBP11.9m 
----------------------------  ---------  --------- 
 Statutory profit before        GBP3.5m    GBP5.1m 
  tax 
----------------------------  ---------  --------- 
 Basic earnings per share         10.8p      15.6p 
----------------------------  ---------  --------- 
 Interim dividend per share        3.3p       3.0p 
----------------------------  ---------  --------- 
 

(1) Adjusted for amortisation of acquired intangible assets, restructuring costs and site closure costs.

Highlights

   --    First half performance as expected 
   --    Full year trading remains in line with our expectations 

-- Robust order book of GBP39.1 million as at 31 March, a 13.1% increase on the same time last year

   --    Mixed markets 

o Industrial laser market improved in Q2

o Strong performance from telecommunications and fibre sensing products

o Aerospace & defence markets lower due to programme timings

-- Continued investment for the future - GBP5.6 million invested in the Group's facilities and equipment and GBP3.5 million in R&D and new products

   --    Interim dividend increased to 3.3p (2015: 3.0p) 

Mark Webster, Chief Executive Officer of Gooch & Housego PLC, commented on the results:

"G&H is well-positioned to benefit from improving market conditions and has the capacity to respond to increasing demand. Our commitment to diversification has enabled us to navigate a challenging period at the beginning of the year and still be on track to deliver our full year expectations.

We remain committed to our strategy of diversification and moving up the value chain whilst continuing to invest in our continuous improvement programme, which will underpin future performance."

For further information please contact:

 
                             Mark Webster / Andrew 
 Gooch & Housego PLC          Boteler                 01460 256 440 
                             Mark Court / Sophie 
 Buchanan                     Cowles                  020 7466 5000 
 Investec Bank plc (Nomad    Patrick Robb / David 
  & Broker)                   Anderson                020 7597 4000 
 

Notes to editors

1. Gooch & Housego is a photonics technology business headquartered in Ilminster, Somerset, UK with operations in the USA and Europe. A world leader in its field, the company researches, designs, engineers and manufactures advanced photonic systems, components and instrumentation for applications in the Aerospace & Defence, Industrial, Life Sciences and Scientific Research sectors. World leading design, development and manufacturing expertise is offered across a broad range of complementary technologies.

2. This announcement contains certain forward-looking statements that are based on management's current expectations or beliefs as well as assumptions about future events. These are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which G&H operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results, and G&H's plans and objectives, to differ materially from those currently anticipated or implied in the forward-looking statements. Investors should not place undue reliance on any such statements. Nothing in this announcement should be construed as a profit forecast.

Operating and Financial Review

Performance Overview

The Company saw a steady recovery in the second quarter after a slower than expected start to the year, characterised by sustained demand for our products. This move from a weak first quarter to a much stronger Q2 is demonstrated by the 57% increase in order intake between the two quarters. Half year revenues were only marginally lower than those of 1H 2015, which was a record half year for the Company. We continue to expect a good second half trading performance driven by orders for our fibre business, in particular high reliability undersea fibre components, fibre based satellite communications and fibre optic sensing, in addition to a recovering microelectronics sector.

The increase in our interim dividend by 10% reflects our confidence in the business going forward and is underpinned by our strong balance sheet.

 
 REVENUE 
 Six months ended             2016               2015 
  31 March 
                       -----------------  ----------------- 
                        GBP'000     % of   GBP'000     % of 
                                   total              total 
---------------------  --------  -------  --------  ------- 
 Industrial              24,764      65%    22,313      57% 
 Aerospace & Defence      8,064      21%    10,314      27% 
---------------------  --------  -------  --------  ------- 
 Life Sciences            3,941      10%     4,317      11% 
---------------------  --------  -------  --------  ------- 
 Scientific Research      1,592       4%     2,001       5% 
---------------------  --------  -------  --------  ------- 
 Group Revenue           38,361     100%    38,945     100% 
---------------------  --------  -------  --------  ------- 
 

Group revenue for the half year was GBP38.4 million, a fall of GBP0.6 million, or 1% over the comparative period last year. On a constant currency basis, revenue was 5% lower.

Order intake in the first half of the year has been encouraging. The order book at 31 March 2016 was GBP39.1 million (31 March 2015: GBP34.6 million) and the Company has booked GBP41.1 million in orders since 1 October 2015.

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.

Overall, business in our industrial market was good in the first six months of the year. Overall, sales of products into our industrial markets in the six months to 31 March 2016 were 11% higher compared with the equivalent period last year.

The industrial laser market was weaker in the first half of the year driven by lower demand from China for lasers used in microelectronic manufacturing. The shortfall in demand in our industrial laser market was more than offset by increases in our fibre-optic sensing and telecommunications markets.

In fibre-optic sensing G&H's Fibre-Q products continue to be adopted and lead the way in this fast growing market place, with the result that the Company is now benefitting from positive market trends in fibre optic sensing and generating meaningful revenue streams.

In telecommunications, whilst sales of lithium niobate wafers for modulation applications continue to be strong, the significant growth has come from demand for fibre optic components for under-sea telecommunications applications. We expect this growth to continue to strengthen throughout this year and into next, as non-traditional companies enter this market and look to lay their own undersea networks. The overall telecommunications market segment increased by 18% compared with the equivalent period last year.

Products and Markets - Aerospace and Defence

Product quality, reliability and performance are paramount in this sector and that plays to G&H's strengths, along with our commitment to provide value. We have strong, well established positions in target designation and range finding, ring laser and fibre optic gyroscope navigational systems, infrared and RF countermeasures and space photonics.

The Aerospace & Defence market for G&H is characterised by high-value, long-term programmes involving the main US and European defence contractors. G&H'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 down for G&H during the first six months. The major part of this reduction is a direct function of order and programme timing. This sector is expected to recover in the second half of this financial year. Moreover, with the continued adoption of technologies which play to G&H's core capabilities, together with the investment that the business has made in business development and R&D in this market sector, we continue to believe there is strong growth potential for us going forward.

Products and Markets - Life Sciences

G&H'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 fell by 9% in the six months to 31 March 2016, compared with the equivalent period last year, driven mainly by lower demand requirements from two major customers.

The principal commercial application of OCT systems is retinal imaging, and G&H 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. G&H is continuing to supply crystals, precision optics and fibre components for new system construction and expects ongoing business to service replacement and maintenance requirements.

Strategy

G&H's strategy is based around a continued commitment to the twin pillars of diversification and moving up the value chain. A more vertically integrated and balanced business, which is more robust and less exposed to the cyclical nature of some of our core products is one of the key aims. The progress to date against this goal has enabled us to navigate a challenging period at the beginning of the year and still be on track to deliver our full year expectations, despite slower than expected sales in the first quarter. Further investment in R&D and market focused business development aim to provide the momentum that will drive rates of organic growth above historical norms. In addition management continues to actively look for strategic partnerships and acquisitions.

R&D: In the first six months of the current financial year, G&H invested GBP3.5 million in research & development. This represents 9.1% of revenue and is 8% higher than the same period last year (2015: GBP3.2m). G&H's continued commitment to investing in targeted R&D programmes is bearing fruit, with a record thirteen new products launched at the Photonics West trade show in February 2016.

Diversification: G&H 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. We will continue to invest in all of our key sectors in order to ensure we maintain a balanced portfolio and over time achieve a critical mass in Life Sciences and A&D, as well as the Industrial sector.

Moving up the Value Chain: G&H 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 G&H 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 Systems Technology Group 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.

Operations

In 2015 G&H took the decision to re-locate its Palo Alto facility to nearby Fremont. This decision was based on a landlord change which threatened the long term viability of Palo Alto as a location. This move is now complete and has provided a much improved facility and room for growth at a similar rent. The move itself took longer than expected due to regulatory licence and landlord contractual issues. The delay contributed an additional GBP0.9 million in costs in the first six months of 2016. The Torquay site has recently been expanded and upgraded allowing us to manage the capacity challenges that come with a 2.5 fold increase in demand for Hi-Rel undersea fibre couplers. Further investment in capacity at this site will continue throughout 2016.

Our continuous improvement programme is proceeding well. Operationally the move to a lean manufacturing environment across all of our sites is set to deliver efficiency savings in 2016 and the drive for fewer more productive R&D projects combined with enhanced business development support has started to deliver an increased number of product opportunities.

Acquisitions

G&H 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, G&H 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.

 
 RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES 
 
 
                             Operating          Net finance          Taxation           Earnings 
                               Profit              costs                                per share 
----------------------  ------------------  ------------------  ------------------  ---------------- 
 Half Year to               2016      2015      2016      2015      2016      2015     2016     2015 
  31 March                GBP000    GBP000    GBP000    GBP000    GBP000    GBP000    pence    pence 
----------------------  --------  --------  --------  --------  --------  --------  -------  ------- 
 Reported                  3,560     5,248      (33)     (148)     (913)   (1,363)     10.8     15.6 
----------------------  --------  --------  --------  --------  --------  --------  -------  ------- 
 Amortisation 
  of acquired 
  intangible assets          733       802         -         -     (191)     (209)      2.2      2.5 
 Restructuring 
  costs                      223       417         -         -      (58)     (108)      0.7      1.2 
 Fremont site 
  move costs                 883         -         -         -     (230)         -      2.7        - 
 Abortive transaction 
  fees                       194         -         -         -      (50)         -      0.6        - 
----------------------  --------  --------  --------  --------  --------  --------  -------  ------- 
 Adjusted                  5,593     6,467      (33)     (148)   (1,442)   (1,680)     17.0     19.3 
----------------------  --------  --------  --------  --------  --------  --------  -------  ------- 
 

As expected, adjusted profit before tax was GBP5.6 million, down 11.1% on the prior year (H1 2015: GBP6.3 million). Margins were impacted by the product mix and the one off costs associated with the delayed Fremont site relocation.

Cash Flow and Financing

In the six months to 31 March 2016 G&H generated cash from operations of GBP2.9 million, compared with GBP5.8 million in the same period of 2015. 1H 2016 operating cash flows include a net cash outflow of GBP0.9 million relating to the relocation of the Palo Alto facility.

As part of the preparations for moving its Palo Alto site to nearby Fremont, the business built inventory levels to satisfy expected customer requirements while the new facility was brought on line. Since the completion of the move, inventory levels at our new Fremont site are $1.7 million lower than at 30 September 2015 as the strategic inventory build has been unwound. At the same time the business has invested in inventory at our Torquay facility in order to meet the demanding customer ramp programmes. The utilisation of the Fremont strategic inventory build, together with the impact of exchange rates and the working capital investment at our Torquay facility, have resulted in a net inventory increase of GBP0.3 million to GBP16.3 million since the year end.

Capital expenditure on property, plant and equipment was GBP5.6 million in the period (2015: GBP1.1 million). The main fixed asset additions were in relation to the Fremont facility move and expanding our Torquay site. G&H has completed the upgrade and expansion of two of its key sites in the last six months. In addition the Company has commenced the modernisation of its Cleveland facility. These investments, together with our continued commitment to the principles of lean manufacturing are vital to improved manufacturing performance in the medium term.

The Company's net cash position remains robust at GBP12.3 million, down from GBP17.3 million at 30 September 2015, following the investment in our Fremont and Torquay facilities.

Staff

The Company workforce reduced from 700 at 30 September 2015 to 665 at the end of March 2016. This reduction was facilitated by the efficiency measures that the business has introduced in the last twelve months.

Dividends

The Directors have declared an interim dividend of 3.3p per share (2015 : 3.0p per share), a 10% increase on the prior period, which is reflective of the Directors' confidence in the business going forward and is underpinned by our strong balance sheet. This will be payable on 18 July 2016 to shareholders on the register as at 24 June 2016.

Prospects and outlook

G&H remains committed to the twin pillars of our strategy, namely diversification and moving up the value chain. Current mixed market conditions have emphasised the value of having a more diversified business where the strong performance of our fibre business has allowed us to ameliorate some of the first half impact.

G&H is well-positioned to benefit from improving market conditions and has the capacity to respond to increasing demand. Our commitment to diversification has enabled us to navigate a challenging period at the beginning of the year and still be on track to deliver our full year expectations.

The Company will continue to pursue its strategy and invest in our continuous improvement programme prioritising further operational excellence, enhanced business development in our key markets and a more focused R&D portfolio; all of which will underpin our future performance.

   Gareth Jones               Mark Webster                          Andrew Boteler 
   Chairman                     Chief Executive Officer            Chief Financial Officer 

7 June 2016

Unaudited interim results for the 6 months ended 31 March 2016

 
 Group Income Statement                   Half Year       Half Year      Full Year 
                                                 to              to             to 
                                        31 Mar 2016     31 Mar 2015    30 Sep 2015 
                               Note     (Unaudited)     (Unaudited)      (Audited) 
                                            GBP'000         GBP'000        GBP'000 
                                     --------------  --------------  ------------- 
 Revenue                        5            38,361          38,945         78,702 
 Cost of revenue                           (25,252)        (23,385)       (47,659) 
                                     --------------  --------------  ------------- 
 Gross profit                                13,109          15,560         31,043 
 Research and Development                   (2,889)         (2,921)        (5,712) 
 Sales and Marketing                        (2,976)         (2,687)        (5,626) 
 Administration                             (5,247)         (5,723)       (10,353) 
 Other income and expenses                    1,563           1,019            942 
                                     --------------  --------------  ------------- 
 Operating profit               5             3,560           5,248         10,294 
 Net finance costs                             (33)           (148)          (188) 
                                     --------------  --------------  ------------- 
 Profit before income tax 
  expense                                     3,527           5,100         10,106 
 Income tax expense             6             (913)         (1,363)        (2,647) 
                                     --------------  --------------  ------------- 
 Profit for the period                        2,614           3,737          7,459 
 Earnings per share             7             10.8p           15.6p          30.9p 
                                     --------------  --------------  ------------- 
 

Reconciliation of operating profit to adjusted operating profit:

 
                                       Half Year       Half Year     Full Year 
                                              to              to     to 30 Sep 
                                                                          2015 
                                     31 Mar 2016     31 Mar 2015     (Audited) 
                                     (Unaudited)     (Unaudited) 
                                         GBP'000         GBP'000       GBP'000 
                                  --------------  --------------  ------------ 
 Operating profit                          3,560           5,248        10,294 
 Amortisation of acquired 
  intangible assets                          733             802         1,604 
 Restructuring costs                         223             417         1,204 
 Fremont site move costs                     883               -             - 
 Abortive transaction fees                   194               -             - 
                                  --------------  --------------  ------------ 
 Adjusted operating profit                 5,593           6,467        13,102 
                                  --------------  --------------  ------------ 
 
 
 Group Statement of Comprehensive         Half Year       Half Year     Full Year 
  Income                                         to              to     to 30 Sep 
                                                                             2015 
                                             31 Mar     31 Mar 2015     (Audited) 
                                               2016 
                                        (Unaudited)     (Unaudited) 
                                            GBP'000         GBP'000       GBP'000 
                                     --------------  --------------  ------------ 
 Profit for the period                        2,614           3,737         7,459 
 Other comprehensive income 
 Fair value adjustment of interest 
  rate swap net of tax                            -              16            21 
 Currency translation difference              2,289           2,871         1,800 
                                     --------------  --------------  ------------ 
 Other comprehensive income for 
  the period                                  2,289           2,887         1,821 
 Total comprehensive income for 
  the period                                  4,903           6,624         9,280 
                                     --------------  --------------  ------------ 
 

Unaudited interim results for the 6 months ended 31 March 2016

 
 Group Balance Sheet                       31 Mar 2016     31 Mar 2015   30 Sep 2015 
                                           (Unaudited)     (Unaudited)     (Audited) 
                                               GBP'000         GBP'000       GBP'000 
                                        --------------  --------------  ------------ 
 Non-current assets 
 Property, plant and equipment                  29,645          24,031        24,915 
 Intangible assets                              21,074          21,312        20,155 
 Deferred income tax assets                      2,382           2,797         2,552 
                                        --------------  --------------  ------------ 
                                                53,101          48,140        47,622 
 Current assets 
 Inventories                                    16,269          16,304        16,013 
 Income tax assets                                 800             401           854 
 Trade and other receivables                    15,532          15,690        14,394 
 Cash and cash equivalents                      17,810          17,240        22,556 
                                                50,411          49,635        53,817 
 Current liabilities 
 Trade and other payables                     (11,675)        (13,591)      (14,059) 
 Borrowings                                       (10)         (5,349)          (39) 
 Income tax liabilities                          (312)            (96)         (411) 
 Provision for other liabilities 
  and charges                                    (380)           (389)         (342) 
                                        --------------  --------------  ------------ 
                                              (12,377)        (19,425)      (14,851) 
 
 Net current assets                             38,034          30,210        38,966 
                                        --------------  --------------  ------------ 
 
 Non-current liabilities 
 Borrowings                                    (5,482)               -       (5,189) 
 Deferred income tax liabilities               (3,169)         (2,478)       (3,032) 
                                               (8,651)         (2,478)       (8,221) 
 
 Net assets                                     82,484          75,872        78,367 
                                        --------------  --------------  ------------ 
 
 Shareholders' equity 
  Capital and reserves 
  attributable to equity 
  shareholders 
 Called up share capital                         4,852           4,812         4,818 
 Share premium account                          15,530          15,515        15,530 
 Merger reserve                                  2,671           2,671         2,671 
 Hedging reserve                                     -             (5)             - 
 Cumulative translation 
  reserve                                        3,319           2,101         1,030 
 Retained earnings                              56,112          50,778        54,318 
                                        --------------  --------------  ------------ 
 Equity Shareholders' Funds                     82,484          75,872        78,367 
                                        --------------  --------------  ------------ 
 

Unaudited interim results for the 6 months ended 31 March 2016

 
 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 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 
 
 At 1 October 2015                     4,818     15,530      2,671           -       55,348     78,367 
 Profit for the period                     -          -          -           -        2,614      2,614 
 Other comprehensive income 
  for the period                           -          -          -           -        2,289      2,289 
                                   ---------  ---------  ---------  ----------  -----------  --------- 
 Total comprehensive income 
  for the period                           -          -          -           -        4,903      4,903 
                                   ---------  ---------  ---------  ----------  -----------  --------- 
 Dividends                                 -          -          -           -      (1,254)    (1,254) 
 Proceeds from shares issued              34          -          -           -         (34)          - 
 Fair value of employee services           -          -          -           -          319        319 
 Tax credit relating to share 
  option schemes                           -          -          -           -          149        149 
                                   ---------  ---------  ---------  ----------  -----------  --------- 
 At 31 March 2016 (unaudited)          4,852     15,530      2,671           -       59,431     82,484 
                                   ---------  ---------  ---------  ----------  -----------  --------- 
 
 
 
 

Unaudited interim results for the 6 months ended 31 March 2016

 
 Group Cash Flow Statement                        Half Year       Half Year     Full Year 
                                                         to              to     to 30 Sep 
                                                                                     2015 
                                                     31 Mar          31 Mar     (Audited) 
                                                       2016            2015 
                                                (Unaudited)     (Unaudited) 
                                                    GBP'000         GBP'000       GBP'000 
                                             --------------  --------------  ------------ 
 Cash flows from operating activities 
 Cash generated from operations                       2,911           5,771        14,692 
 Income tax paid                                      (465)           (692)       (1,067) 
                                             --------------  --------------  ------------ 
 Net cash generated from operating 
  activities                                          2,446           5,079        13,625 
                                             --------------  --------------  ------------ 
 Cash flows from investing activities 
 Purchase of property, plant 
  and equipment                                     (5,639)         (1,090)       (3,053) 
 Sale of property, plant and 
  equipment                                               -             631           635 
 Purchase of intangible assets                        (654)           (337)         (793) 
 Interest received                                       20              11            26 
                                             --------------  --------------  ------------ 
 Net cash used in investing 
  activities                                        (6,273)           (785)       (3,185) 
                                             --------------  --------------  ------------ 
 Cash flows from financing activities 
 Drawdown of acquisition borrowing 
  facility                                                -           5,168         5,168 
 Repayment of borrowings                               (29)         (8,731)       (8,777) 
 Proceeds from issues of share 
  capital                                                 -              98           115 
 Dividends paid to ordinary 
  shareholders                                      (1,254)         (1,101)       (1,823) 
 Interest paid                                         (50)           (178)         (189) 
 Net cash used in financing 
  activities                                        (1,333)         (4,744)       (5,506) 
                                             --------------  --------------  ------------ 
 Net (decrease) / increase in 
  cash                                              (5,160)           (450)         4,934 
 Cash at beginning of the period                     22,556          17,094        17,094 
 Exchange gains on cash                                 414             596           528 
                                             --------------  --------------  ------------ 
 Cash at the end of the period                       17,810          17,240        22,556 
                                             --------------  --------------  ------------ 
 
 
 Notes to the Group Cash                       Half Year       Half Year      Full Year 
  Flow Statement                                      to              to             to 
                                             31 Mar 2016     31 Mar 2015    30 Sep 2015 
                                             (Unaudited)     (Unaudited)      (Audited) 
                                                 GBP'000         GBP'000        GBP'000 
 Profit before income tax                          3,527           5,100         10,106 
 Adjustments for: 
 - Amortisation of acquired 
  intangible assets                                  733             802          1,604 
 - Amortisation of other 
  intangible assets                                  110              88            301 
 - Depreciation                                    1,428           1,355          2,715 
 - Loss on disposal of property, 
  plant 
  and equipment                                        -               -            508 
 - Share based payment obligations                   319             220            485 
 - Finance income                                   (20)            (11)           (26) 
 - Finance costs                                      53             159            214 
                                          --------------  --------------  ------------- 
 Total adjustments                                 2,623           2,613          5,801 
 
 Changes in working capital 
 - Inventories                                       220           (816)          (729) 
 - Trade and other receivables                     (811)         (1,160)        (1,101) 
 - Trade and other payables                      (2,648)              34            615 
 Total changes in working 
  capital                                        (3,239)         (1,942)        (1,215) 
 
 Cash generated from operating 
  activities                                       2,911           5,771         14,692 
                                          --------------  --------------  ------------- 
 

Reconciliation of net cash flow to movements in net cash

 
                                           Half Year       Half Year     Full Year 
                                                  to              to            to 
                                         31 Mar 2016     31 Mar 2015        30 Sep 
                                                                              2015 
                                         (Unaudited)     (Unaudited)     (Audited) 
                                             GBP'000         GBP'000       GBP'000 
                                      --------------  --------------  ------------ 
 (Decrease) / increase in 
  cash in the period                         (5,160)           (450)         4,934 
 Borrowings                                        -         (5,168)       (5,168) 
 Repayment of borrowings                          29           8,731         8,777 
 Changes in net cash resulting 
  from cash flows                            (5,131)           3,113         8,543 
 
 Translation differences                         121              92            99 
                                      --------------  --------------  ------------ 
 Movement in net cash in 
  the period / year                          (5,010)           3,205         8,642 
 
 Net cash at start of period                  17,328           8,686         8,686 
 Net cash at end of period                    12,318          11,891        17,328 
                                      --------------  --------------  ------------ 
 

Analysis of net cash

 
                          At 1                 Exchange   At 31 Mar 
                      Oct 2015    Cash flow    movement        2016 
                       GBP'000      GBP'000     GBP'000     GBP'000 
                    ----------  -----------  ----------  ---------- 
 Cash at bank and 
  in hand               22,556      (5,160)         414      17,810 
 
 Debt due after 1 
  year                 (5,189)            -       (293)     (5,482) 
 Finance leases           (39)           29           -        (10) 
                    ----------  -----------  ----------  ---------- 
 Net cash               17,328      (5,131)         121      12,318 
                    ----------  -----------  ----------  ---------- 
 

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 7 June 2016. 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 2015 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 2015 are unaudited.

The Interim Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 7 June 2016. 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 2015, 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 2015.

   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 2015.

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 
  2016 
 Revenue 
 Total revenue                         8,064           3,941       27,365        1,592           -     40,962 
 Inter and intra-division                  -               -      (2,601)            -           -    (2,601) 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 External revenue                      8,064           3,941       24,764        1,592           -     38,361 
 Divisional expenses                 (7,364)         (3,271)     (20,059)      (1,375)       (462)   (32,531) 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 EBITDA(1)                               700             670        4,705          217       (462)      5,830 
 EBITDA %                               8.7%           17.0%        19.0%        13.6%           -      15.2% 
 Depreciation and Amortisation         (248)           (178)        (985)         (66)        (60)    (1,537) 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 Operating profit before 
  amortisation of acquired 
  intangible assets                      452             492        3,720          151       (522)      4,293 
 Amortisation of acquired 
  intangible assets                        -               -            -            -       (733)      (733) 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 Operating profit                        452             492        3,720      151         (1,255)      3,560 
 Operating profit margin 
  %                                     5.6%           12.5%        15.0%         9.5%           -       9.3% 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 Add back non-recurring 
  items                                   21              23        1,055            7         194      1,300 
 Operating profit excluding 
  non-recurring items                    473             515        4,775          158     (1,061)      4,860 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 Adjusted profit margin 
  %                                     5.9%           13.1%        19.3%         9.9%           -      12.7% 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 
                                   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% 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 Add back non-recurring 
  items                                   64              35          295           23           -        417 
 Operating profit excluding 
  non-recurring items                  1,089             590        5,040          398     (1,452)      5,665 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 Adjusted profit margin 
  %                                    10.6%           13.7%        22.6%        19.9%           -      14.5% 
-------------------------------  -----------  --------------  -----------  -----------  ----------  --------- 
 

(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 2016        31 Mar 2015 
                        (Unaudited)        (Unaudited) 
                            GBP'000            GBP'000 
                      -------------      ------------- 
 United Kingdom               8,351              7,400 
 America                     15,189             17,144 
 Continental Europe           8,687              8,128 
 Asia-Pacific                 6,134              6,273 
                             38,361             38,945 
                      -------------      ------------- 
 
   6.      Income tax expense 

Analysis of tax charge in the period

 
                                                   Half Year       Half Year         Full Year 
                                                          to              to         to 30 Sep 
                                                                                2015 (Audited) 
                                                 31 Mar 2016          31 Mar 
                                                                        2015 
                                                 (Unaudited)     (Unaudited) 
                                                     GBP'000         GBP'000           GBP'000 
                                              -------------- 
 Current taxation 
 UK Corporation tax                                      448             562        1,480 
 Overseas tax                                            319             380               724 
 Adjustments in respect of prior 
  year tax charge                                          -               -             (983) 
                                              --------------  --------------  ---------------- 
 Total current tax                                       767             942             1,221 
 
 Deferred tax 
 Origination and reversal of temporary 
  differences                                            146             421               274 
 Adjustments in respect of prior 
  year deferred tax                                        -               -             1,152 
 Total deferred tax                                      146             421             1,426 
 
 Income tax expense per income 
  statement                                              913           1,363             2,647 
 
 

The tax charge for the six months ended 31 March 2016 is based on the estimated effective rate of the tax for the Group for the full year to 30 September 2016. 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 
                                                                              2015 
                                         31 Mar 2016          31 Mar     (Audited) 
                                                                2015 
                                         (Unaudited)     (Unaudited) 
                                                 No.             No.           No. 
                                      --------------  --------------  ------------ 
 Number of shares used for basic 
  earnings per share                      24,213,432      24,041,328    24,115,878 
 Dilutive shares                             393,973         373,847       405,311 
 Number of shares used for dilutive 
  earnings per share                      24,607,405      24,415,175    24,521,189 
                                      --------------  --------------  ------------ 
 

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 2016        31 Mar 2015        30 Sep 2015 
                                   (Unaudited) 
                                                      (Unaudited)         (Audited) 
                                           p per              p per              p per 
                                GBP'000    share   GBP'000    share   GBP'000    share 
                               --------  -------  --------  -------  --------  ------- 
 Basic earnings per share         2,614    10.8p     3,737    15.6p     7,459    30.9p 
 Adjustments net of income 
  tax expense: 
 Amortisation of acquired 
  intangible assets                 542     2.2p       593     2.5p     1,184     4.9p 
 Restructuring costs                165     0.7p         -        -         -        - 
 Fremont site move costs            653     2.7p       309     1.2p       891     3.7p 
 Abortive transaction fees          144     0.6p         -        -         -        - 
 Total adjustments net of 
  income tax expense              1,504     6.2p       902     3.7p     2,075     8.6p 
 
 Adjusted basic earnings per 
  share                           4,118    17.0p     4,639    19.3p     9,534    39.5p 
                               --------  -------  --------  -------  --------  ------- 
 
 
 Basic diluted earnings per 
  share                        2,614   10.6p   3,737   15.3p   7,459   30.4p 
 Adjusted diluted earnings 
  per share                    4,118   16.7p   4,639   19.1p   9,534   38.9p 
                              ------  ------  ------  ------  ------  ------ 
 

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 3.3 pence per share for the half year ended 31 March 2016. This dividend has not been accounted for within the period to 31 March 2016 as it is yet to be paid.

 
                                         Half Year       Half Year     Full Year 
                                                to              to     to 30 Sep 
                                                                            2015 
                                       31 Mar 2016          31 Mar     (Audited) 
                                                              2015 
                                       (Unaudited)     (Unaudited) 
                                           GBP'000         GBP'000       GBP'000 
                                    --------------  --------------  ------------ 
 Final 2015 dividend paid : 5.2p             1,254               -             - 
  per share 
 2015 Interim dividend paid : 
  2.6p per share                                 -               -           722 
 Final 2014 dividend paid in 2015 
  : 4.0p per share                               -           1,101         1,101 
                                    --------------  --------------  ------------ 
                                             1,254           1,101         1,823 
                                    --------------  --------------  ------------ 
 
   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 
 
                                       2016           2015       2016       2015 
                                        No.            No.    GBP'000    GBP'000 
                                                            --------- 
 Allotted, issued and fully 
  paid 
  Ordinary share of 20p 
  each                           24,260,024     24,062,036      4,852      4,812 
                              -------------  -------------  ---------  --------- 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR LLFIRRFIRIIR

(END) Dow Jones Newswires

June 07, 2016 02:00 ET (06:00 GMT)

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