TIDMGHH
RNS Number : 1960H
Gooch & Housego PLC
06 June 2017
6 June 2017
GOOCH & HOUSEGO PLC
INTERIM RESULTS FOR THE SIX MONTHSED 31 MARCH 2017
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 2017.
Financial Highlights
Period ended 31 March HY2017 HY2016 Change (%)
---------------------------- --------- --------- -----------
Revenue GBP52.2m GBP38.4m 36.0%
---------------------------- --------- --------- -----------
Adjusted profit before
tax(1) GBP6.2m GBP5.6m 11.8%
---------------------------- --------- --------- -----------
Adjusted basic earnings
per share (1) 18.7p 17.0p 10.0%
---------------------------- --------- --------- -----------
Net cash GBP7.8m GBP12.3m (36.9%)
---------------------------- --------- --------- -----------
Statutory profit before
tax GBP4.7m GBP3.5m 33.3%
---------------------------- --------- --------- -----------
Basic earnings per share 14.1p 10.8p 30.6%
---------------------------- --------- --------- -----------
Interim dividend per share 3.7p 3.3p 12.1%
---------------------------- --------- --------- -----------
(1) Adjusted for amortisation of acquired intangible assets and
non-recurring items.
Highlights
-- Strong revenue growth driven by telecoms, precision
inspection equipment and microelectronic manufacturing sectors
-- Revenue growth of 36.0% compared with the same period last
year. Excluding the impact of foreign exchange, an increase of
18.2% over last year
-- Completed the acquisition of StingRay Optics in February 2017
-- Continued investment in people and infrastructure to drive
further growth and take advantage of the positive market
conditions
-- Targeted investment in R&D of GBP4.5 million, up 28.6% on the previous year
-- Adjusted profit growth of 11.8% compared with same period last year
-- Cash flow from operations of GBP7.9 million, compared with GBP2.9m last year
-- Record order book of GBP66.6 million, as at 31 March 2017, an
increase of 70.5% compared with the same period last year
-- Interim dividend increased to 3.7p (2016:3.3p)
Mark Webster, Chief Executive Officer of Gooch & Housego
PLC, commented on the results:
"G&H is well positioned to take advantage of the positive
market conditions and has continued to invest in people and
infrastructure in order to meet the demands of a strong order book.
We remain on track to meet our full year expectations.
"G&H is committed to a strategy of diversification and
moving up the value chain. This has been most evident in the
A&D sector where our most recent acquisitions, combined with
increased investment in R&D have gone some way towards our goal
of achieving 'critical mass' in this sector.
"We will continue to invest in our performance improvement
programme, which will underpin our future growth."
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 5970
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
Market conditions continue to be positive, driven in large part
by the telecommunications and industrial sectors, in particular
high reliability fibre couplers for undersea cables, precision
inspection equipment and critical components used in
microelectronic manufacturing. First half revenue growth has been
very good, albeit benefitting from a favourable foreign exchange
environment and a relatively weak comparator period. The Company
saw an acceleration in growth in the period, with the second
quarter delivering 16.0% more revenue compared to quarter one. We
are expecting a good second half trading performance driven by
orders for our fibre business and the continued strength of the
microelectronics sector.
Our order book stood at a record GBP66.6 million as at 31 March
2017, which represents an increase of 70.5% compared to the same
time last year. Excluding the impact of foreign exchange and
acquisitions this represents an increase of 17.2% over last year.
Further investment has been necessary to enable us to take
advantage of this strong order book, in particular at our Ilminster
site, where we have upgraded equipment and trained new
operators.
The increase in our interim dividend by 12.1% reflects our
confidence in the business going forward and is underpinned by our
strong balance sheet.
REVENUE
Six months ended 2017 2016
31 March
----------------- -----------------
GBP'000 % of GBP'000 % of
total total
--------------------- -------- ------- -------- -------
Industrial 31,336 60% 24,764 65%
Aerospace & Defence 14,578 28% 8,064 21%
--------------------- -------- ------- -------- -------
Life Sciences 4,751 9% 3,941 10%
--------------------- -------- ------- -------- -------
Scientific Research 1,488 3% 1,592 4%
--------------------- -------- ------- -------- -------
Group Revenue 52,153 100% 38,361 100%
--------------------- -------- ------- -------- -------
Group revenue for the half year was GBP52.2 million, an increase
of GBP13.8 million, or 36.0% over the comparative period last year.
On a constant currency basis, revenue was 18.2% higher.
Order intake in the first half of the year has been encouraging.
The Company has booked GBP59.5 million in orders since 1 October
2016, compared to GBP41.1 million in the corresponding period last
year. Since March the order book has strengthened further.
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 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 2017 were 26.5% higher
compared with the equivalent period last year.
The industrial laser market was a principal driver of the
revenue growth due to the continued high demand for precision
lasers used in microelectronic manufacturing. This was a demand
trend that emerged in the second half of last year. Demand for
these products remains strong.
In telecommunications, the "step change" in demand for fibre
optic components for under-sea telecommunications applications,
reported throughout last year, has continued. We expect this demand
to be maintained throughout this year and into next, as
non-traditional, Silicon Valley based companies enter this market
and look to lay their own undersea networks. Sales of lithium
niobate wafers for modulation applications also continue to be
high. The overall telecommunications market segment increased by
68% compared with the equivalent period last year.
Products and Markets - Aerospace & 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 solid, well established
positions in target designation and range finding, ring laser and
fibre optic gyroscope navigational systems, infrared and RF
countermeasures and space satellite communications.
The market for G&H is characterised by high-value, long-term
programmes involving the main US and European defence contractors.
Over the last ten months G&H has strengthened its position in
this market with the acquisition of three businesses (Kent
Periscopes, Alfalight & StingRay) whose focus is either
entirely, or largely Aerospace & Defence. This reflects
G&H's commitment to this market which continues to represent an
attractive growth area as more applications seek optical solutions
in this demanding area.
Our Aerospace & Defence business grew by 80.8% during the
first six months of FY2017, compared to the equivalent period last
year. Excluding the impact of acquisitions, Aerospace & Defence
grew organically by 15.0% compared to the same period last
year.
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.
Our Life Sciences business grew by 20.6% in the six months to 31
March 2017, compared with the equivalent period last year, driven
mainly by increased demand within our OCT business.
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.
G&H considers OCT to be a growth technology and is investing
both in the development of new products and in keeping its current
products 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, which are part
of long term government funded projects, both in the USA and
Europe. 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 continue to service
replacement and maintenance requirements.
Strategy
G&H's strategy is built around the twin pillars of
diversification and moving up the value chain. In order to ensure
its strategic goals are met management considers investment in
R&D, acquisitions and strategic partnerships.
R&D: In the first six months of the current financial year,
G&H invested GBP4.5 million in targeted research &
development. Our main target areas are fibre based lasers, fibre
sensing, precision inspection equipment for microelectronic
manufacturing, laser surgery, A&D sub systems, OCT medical
diagnostics and space satellite communications. This represents
8.6% of revenue and is 28.6% higher than the same period last year
(2016: GBP3.5m). G&H's continued commitment to investing in
targeted R&D programmes is bearing fruit, with a record
eighteen new products launched in the period ended 31 March
2017.
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. Our
recent acquisitions have greatly improved our position in A&D,
which now represents 28.0% of our business (2016: 21.0%)
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. Our recent
acquisitions are all photonic design and sub-assembly businesses
and have helped to increase the proportion of our business derived
from non-component revenues from 15.2% in FY2016 to 20.8% in
FY2017. G&H now has "world class" capability in opto-mechanical
design and this substantially enhances our ability to offer "end to
end" design and manufacturing solutions to our customers.
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 in these important areas.
Operations
As reported last year, the Company has committed to upgrading
its Cleveland, Ohio facility. This facility, which houses G&H's
world leading crystal growth capabilities, is a key contributor to
current and future profitability and will benefit from the
modernisation that has been taking place. The upgrade is
substantially complete and we will have invested in the region of
$5 million. The refurbished facility will help drive much needed
operational efficiency, provide greater capacity, as well as a more
compelling showcase for our capabilities for customers.
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 2017 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.
In February 2017 G&H acquired StingRay Optics LLC
("StingRay"), a New Hampshire, USA based specialist designer and
manufacturer of high performance optical and opto-mechanical
subsystems for demanding defence and commercial applications.
StingRay was founded in 2004 and has established itself as a
market leading designer, manufacturer and supplier of world class
custom optical assemblies. The business has a proven capability in
providing system level optical products for use in harsh
environments to key US defence customers. StingRay's product range
covers laboratory, ground based, airborne, Unmanned Aerial Vehicles
(UAVs) and space applications.
The acquisition of StingRay is aligned with G&H's strategic
objectives of moving up the value chain and further diversification
into the Aerospace & Defence sector. Potential synergies
include leveraging G&H's greater reach through our global sales
teams and our expertise in manufacturing infrared precision optics
and specialist coatings.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating Net finance Taxation Earnings
Profit costs per share
---------------------- ------------------ ------------------ ------------------ ----------------
Half Year to 2017 2016 2017 2016 2017 2016 2017 2016
31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence
---------------------- -------- -------- -------- -------- -------- -------- ------- -------
Reported 4,900 3,560 (197) (33) (1,261) (913) 14.1 10.8
---------------------- -------- -------- -------- -------- -------- -------- ------- -------
Amortisation
of acquired
intangible assets 797 733 - - (214) (191) 2.4 2.2
Restructuring
costs 351 1,106 - - (94) (288) 1.0 3.4
Transaction
fees 287 194 - - (77) (50) 0.3 0.6
Interest on
discounted deferred
consideration - - 80 - - - 0.9 -
---------------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted 6,335 5,593 (117) (33) (1,646) (1,442) 18.7 17.0
---------------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted profit before tax was GBP6.2 million, an increase of
11.8% on the prior year (H1 2016: GBP5.6 million). This strong
profit performance has been delivered at the same time as investing
in the increased capacity required to deliver the positive demand
conditions we are currently experiencing. This investment is
largely now in place for the second half of 2017.
Cash Flow and Financing
In the six months to 31 March 2017 G&H generated cash from
operations of GBP7.9 million, compared with GBP2.9 million in the
same period of 2016. In respect of the StingRay acquisition, the
consideration payable by G&H will be up to $20 million, on a
debt free, cash free basis with a normalised level of working
capital remaining in the business. This comprised an initial
consideration of $7.5 million in cash which was paid on completion
from existing G&H debt facilities and $2.5 million in new
G&H ordinary shares, which are 'locked up' for one year from
February 2017. There is also a deferred contingent consideration of
up to $10 million, payable in cash, based upon the performance of
the business for a period of up to three years.
Capital expenditure on property, plant and equipment was GBP3.6
million in the period (2016: GBP5.6 million). The main fixed asset
additions were in relation to the modernisation of our Cleveland
facility. This investment, together with our continued commitment
to the principles of lean manufacturing are vital to improved
manufacturing performance and providing increased capacity in the
medium term.
The Company's net cash position remains robust at GBP7.8
million, down from GBP12.3 million at 30 September 2015, following
the acquisition of StingRay.
Staff
The Company workforce increased from 755 at 30 September 2016 to
786 at the end of March 2017. This increase comes largely from the
acquisition of StingRay, but also reflects our investment in
increased capacity, offset by efficiency savings.
Dividends
The Directors have declared an interim dividend of 3.7p per
share (2016 : 3.3p per share), a 12.1% 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 17 July 2017 to shareholders on the
register as at 23 June 2017.
Prospects and outlook
G&H remains committed to the twin pillars of our strategy,
namely diversification and moving up the value chain. Our recent
A&D acquisitions, combined with increased investment in R&D
have gone some way towards achieving our goal of establishing
'critical mass' in this sector.
The Company is well-positioned to take advantage of positive
market conditions and has continued to invest in people and
infrastructure to meet the demands of a strong order book. We
remain on track to meet our full year expectations.
G&H 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
6 June 2017
Unaudited interim results for the 6 months ended 31 March
2017
Group Income Statement Half Year Half Year Full Year
to to to
31 Mar 2017 31 Mar 2016 30 Sep 2016
Note (Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- -------------
Revenue 5 52,153 38,361 86,051
Cost of revenue (31,944) (25,252) (53,752)
-------------- -------------- -------------
Gross profit 20,209 13,109 32,299
Research and Development (4,096) (2,889) (6,697)
Sales and Marketing (4,706) (2,976) (6,469)
Administration (7,438) (5,247) (11,425)
Other income and expenses 931 1,563 2,476
-------------- -------------- -------------
Operating profit 5 4,900 3,560 10,184
Net finance costs (197) (33) (88)
-------------- -------------- -------------
Profit before income tax
expense 4,703 3,527 10,096
Income tax expense 6 (1,261) (913) (3,048)
-------------- -------------- -------------
Profit for the period 3,442 2,614 7,048
Earnings per share 7 14.1p 10.8p 29.1p
-------------- -------------- -------------
Reconciliation of operating profit to adjusted operating
profit:
Half Year Half Year Full Year
to to to 30 Sep
2016
31 Mar 2017 31 Mar 2016 (Audited)
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Operating profit 4,900 3,560 10,184
Amortisation of acquired
intangible assets 797 733 1,263
Gain on bargain purchase - - (578)
Impairment of goodwill - - 771
Provision for regulatory
compliance risk - - 500
Restructuring costs 351 1,106 1,652
Transaction fees 287 194 466
Adjusted operating profit 6,335 5,593 14,258
-------------- -------------- ------------
Group Statement of Comprehensive Half Year Half Year Full Year
Income to to to 30 Sep
2016
31 Mar 31 Mar 2016 (Audited)
2017
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Profit for the period 3,442 2,614 7,048
Other comprehensive income
Currency translation difference 1,801 2,289 5,954
-------------- -------------- ------------
Other comprehensive income for
the period 1,801 2,289 5,954
Total comprehensive income for
the period 5,243 4,903 13,002
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2017
Group Balance Sheet 31 Mar 2017 31 Mar 2016 30 Sep 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Non-current assets
Property, plant and equipment 34,935 29,645 32,384
Intangible assets 44,418 21,074 29,916
Deferred income tax assets 2,785 2,382 2,674
-------------- -------------- ------------
82,138 53,101 64,974
Current assets
Inventories 21,025 16,269 18,973
Income tax assets - 800 394
Trade and other receivables 21,852 15,532 22,679
Cash and cash equivalents 25,686 17,810 23,167
68,563 50,411 65,213
Current liabilities
Trade and other payables (20,547) (11,675) (19,624)
Borrowings (3) (10) (4)
Income tax liabilities (594) (312) (891)
Provision for other liabilities
and charges (803) (380) (940)
-------------- -------------- ------------
(21,947) (12,377) (21,459)
Net current assets 46,616 38,034 43,754
-------------- -------------- ------------
Non-current liabilities
Borrowings (17,913) (5,482) (11,494)
Deferred income tax liabilities (4,951) (3,169) (4,806)
Deferred consideration (9,437) - (2,256)
(32,301) (8,651) (18,556)
Net assets 96,453 82,484 90,172
-------------- -------------- ------------
Shareholders' equity
Capital and reserves
attributable to equity
shareholders
Called up share capital 4,895 4,852 4,852
Share premium account 15,530 15,530 15,530
Merger reserve 4,640 2,671 2,671
Cumulative translation
reserve 8,785 3,319 6,984
Retained earnings 62,603 56,112 60,135
-------------- -------------- ------------
Equity Shareholders' Funds 96,453 82,484 90,172
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2017
Statement of Changes in Share Share
Equity capital premium Merger Retained Total
account account reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- --------- ----------- ---------
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
At 1 October 2016 4,852 15,530 2,671 67,119 90,172
Profit for the period - - - 3,442 3,442
Other comprehensive income
for the period - - - 1,801 1,801
--------- --------- --------- ----------- ---------
Total comprehensive income
for the period - - - 5,243 5,243
--------- --------- --------- ----------- ---------
Dividends - - - (1,383) (1,383)
Proceeds from shares issued 43 - 1,969 (7) 2,005
Fair value of employee services - - - 329 329
Tax credit relating to share
option schemes - - - 87 87
--------- --------- --------- ----------- ---------
At 31 March 2017 (unaudited) 4,895 15,530 4,640 71,388 96,453
--------- --------- --------- ----------- ---------
Unaudited interim results for the 6 months ended 31 March
2017
Group Cash Flow Statement Half Year Half Year Full Year
to to to 30 Sep
2016
31 Mar 31 Mar (Audited)
2017 2016
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Cash flows from operating activities
Cash generated from operations 7,871 2,911 13,897
Income tax paid (802) (465) (1,324)
-------------- -------------- ------------
Net cash generated from operating
activities 7,069 2,446 12,573
-------------- -------------- ------------
Cash flows from investing activities
Acquisition of subsidiaries,
net of cash acquired (5,549) - (5,687)
Purchase of property, plant
and equipment (3,568) (5,639) (9,710)
Sale of property, plant and 26 - -
equipment
Purchase of intangible assets (348) (654) (629)
Interest received 18 20 39
Interest paid (109) (50) (111)
-------------- -------------- ------------
Net cash used in investing
activities (9,530) (6,323) (16,098)
-------------- -------------- ------------
Cash flows from financing activities
Drawdown of acquisition borrowing
facility 6,045 - 5,426
Repayment of borrowings - (29) (39)
Dividends paid to ordinary
shareholders (1,383) (1,254) (2,055)
Net cash generated from / (used
in) financing activities 4,662 (1,283) 3,332
-------------- -------------- ------------
Net increase / (decrease) in
cash 2,201 (5,160) (193)
Cash at beginning of the period 23,167 22,556 22,556
Exchange gains on cash 318 414 804
-------------- -------------- ------------
Cash at the end of the period 25,686 17,810 23,167
-------------- -------------- ------------
Notes to the Group Cash Half Year Half Year Full Year
Flow Statement to to to
31 Mar 2017 31 Mar 2016 30 Sep 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Profit before income tax 4,703 3,527 10,096
Adjustments for:
- Amortisation of acquired
intangible assets 797 733 1,263
- Amortisation of other
intangible assets 98 110 355
- Gain on bargain purchase
of Alfalight - - (578)
* Impairment of goodwill - - 771
- Depreciation 1,750 1,428 3,042
- Share based payment obligations 329 319 638
- Finance income (17) (20) (39)
- Finance costs 214 53 127
-------------- -------------- -------------
Total adjustments 3,171 2,623 5,579
Changes in working capital
- Inventories (605) 220 223
- Trade and other receivables 1,578 (811) (4,706)
- Trade and other payables (976) (2,648) 2,705
Total changes in working
capital (3) (3,239) (1,778)
Cash generated from operating
activities 7,871 2,911 13,897
-------------- -------------- -------------
Reconciliation of net cash flow to movements in net cash
Half Year Half Year Full Year
to to to
31 Mar 2017 31 Mar 2016 30 Sep
2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Increase / (decrease) in
cash in the period 2,201 (5,160) (193)
Borrowings (6,045) - (5,426)
Repayment of borrowings - 29 39
Changes in net cash resulting
from cash flows (3,844) (5,131) (5,580)
Finance leases acquired - - (25)
Translation differences (54) 121 (55)
-------------- -------------- ------------
Movement in net cash in
the period / year (3,898) (5,010) (5,660)
Net cash at start of period 11,668 17,328 17,328
Net cash at end of period 7,770 12,318 11,668
-------------- -------------- ------------
Analysis of net cash
At 1 Exchange At 31 Mar
Oct 2016 Cash flow movement 2017
GBP'000 GBP'000 GBP'000 GBP'000
---------- ----------- ---------- ----------
Cash at bank and
in hand 23,167 2,201 318 25,686
Debt due after 1
year (11,474) (6,045) (371) (17,890)
Finance leases (25) - (1) (26)
---------- ----------- ---------- ----------
Net cash 11,668 (3,844) (54) 7,770
---------- ----------- ---------- ----------
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 6 June 2017. 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 2016 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 2016 are unaudited.
The Interim Report will be announced to all shareholders on the
London Stock Exchange and published on the Group's website on 6
June 2017. 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 2016,
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
2016.
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 2016.
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
2017
Revenue
Total revenue 14,578 4,751 34,463 1,488 - 55,280
Inter and intra-division - - (3,127) - - (3,127)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
External revenue 14,578 4,751 31,336 1,488 - 52,153
Divisional expenses (13,178) (4,216) (25,121) (1,415) (677) (44,607)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
EBITDA(1) 1,400 535 6,215 73 (677) 7,546
EBITDA % 9.6% 11.3% 19.8% 4.9% - 14.5%
Depreciation and Amortisation (334) (192) (942) (57) (324) (1,849)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit before
amortisation of acquired
intangible assets 1,066 343 5,273 16 (1,001) 5,697
Amortisation of acquired
intangible assets - - - - (797) (797)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit 1,066 343 5,273 16 (1,798) 4,900
Operating profit margin
% 7.3% 7.2% 16.8% 1.1% - 9.4%
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Add back non-recurring
items - - - - 638 638
Operating profit excluding
non-recurring items 1,066 343 5,273 16 (1,160) 5,538
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Adjusted profit margin
% 7.3% 7.2% 16.8% 1.1% - 10.6%
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
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%
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
(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 2017 31 Mar 2016
(Unaudited) (Unaudited)
GBP'000 GBP'000
------------- -------------
United Kingdom 8,714 8,351
America 21,393 15,189
Continental Europe 11,675 8,687
Asia-Pacific 10,371 6,134
52,153 38,361
------------- -------------
6. Income tax expense
Analysis of tax charge in the period
Half Year Half Year Full Year
to to to 30 Sep
2016 (Audited)
31 Mar 2017 31 Mar
2016
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
--------------
Current taxation
UK Corporation tax 569 448 1,760
Overseas tax 517 319 887
Adjustments in respect of prior
year tax charge - - (77)
-------------- -------------- ----------------
Total current tax 1,086 767 2,570
Deferred tax
Origination and reversal of temporary
differences 175 146 218
Adjustments in respect of prior
year deferred tax - - 290
Impact of change in the UK tax
rate - - (30)
Total deferred tax 175 146 478
Income tax expense per income
statement 1,261 913 3,048
The tax charge for the six months ended 31 March 2017 is based
on the estimated effective rate of the tax for the Group for the
full year to 30 September 2017. 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
2016
31 Mar 2017 31 Mar (Audited)
2016
(Unaudited) (Unaudited)
No. No. No.
-------------- -------------- ------------
Number of shares used for basic
earnings per share 24,374,577 24,213,432 24,248,471
Dilutive shares 376,517 393,973 436,112
Number of shares used for dilutive
earnings per share 24,751,094 24,607,405 24,684,583
-------------- -------------- ------------
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 2017 31 Mar 2016 30 Sep 2016
(Unaudited)
(Unaudited) (Audited)
p per p per p per
GBP'000 share GBP'000 share GBP'000 share
-------- ------- -------- ------- -------- -------
Basic earnings per share 3,442 14.1p 2,614 10.8p 7,048 29.1p
Adjustments net of income
tax expense:
Amortisation of acquired
intangible assets 583 2.4p 542 2.2p 930 3.8p
Goodwill impairment - - - - 771 3.2p
Gain on bargain purchase
of Alfalight - - - - (578) (2.4p)
Provision for regulatory
risk compliance - - - - 500 2.1p
Restructuring costs 257 1.0p 818 3.4p 1,261 5.2p
Transaction fees 210 0.9p 144 0.6p 373 1.5p
Interest on discounted deferred
consideration 80 0.3p - - - -
Total adjustments net of
income tax expense 1,130 4.6p 1,504 6.2p 3,257 13.4p
Adjusted basic earnings per
share 4,572 18.7 4,118 17.0p 10,305 42.5p
-------- ------- -------- ------- -------- -------
Basic diluted earnings per
share 3,442 13.8 2,614 10.6p 7,048 28.6p
Adjusted diluted earnings
per share 4,572 18.5 4,118 16.7p 10,305 41.7p
------ ----- ------ ------ ------- ------
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 3.7 pence per
share for the half year ended 31 March 2017. This dividend has not
been accounted for within the period to 31 March 2017 as it is yet
to be paid.
Half Year Half Year Full Year
to to to 30 Sep
2016
31 Mar 2017 31 Mar (Audited)
2016
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Final 2016 dividend paid: 5.7p 1,383 - -
per share
Final 2015 dividend paid : 5.2p
per share - 1,254 1,254
2016 Interim dividend paid :
3.3p per share - - 801
-------------- -------------- ------------
1,383 1,254 2,055
-------------- -------------- ------------
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
2017 2016 2017 2016
No. No. GBP'000 GBP'000
---------
Allotted, issued and fully
paid
Ordinary share of 20p
each 24,476,471 24,260,024 4,895 4,852
------------- ------------- --------- ---------
11. Acquisition of StingRay Optics LLC
On 21 February 2017, the Group completed the acquisition of the
entire unit capital of StingRay Optics LLC, a Keene, New Hampshire,
based specialist designer and manufacturer of high performance
optical and opto-mechanical subsystems for demanding defence and
commercial applications. The acquisition strengthened the Group's
position in the aerospace and defence sector.
The consideration for the acquisition will be up to $20m
comprising initial consideration of $7.5m paid in cash and $2.5m
paid in new G&H ordinary shares. There is also deferred
contingent consideration of up to $10m, payable in cash, based on
the performance of the business for a period of up to three years
post acquisition.
The fair value of the assets acquired is summarised as
follows:
Provisional
fair value
GBP'000
------------------------------- ------------
Property, plant and equipment 98
Intangible assets 7,986
Cash 231
Trade and other receivables 655
Inventory 1,058
Trade and other payables (1,274)
Current and deferred tax
assets 156
Net assets acquired 8,910
-------------------------------- ------------
Consideration paid:
Cash and shares paid on
completion 7,996
Deferred consideration 7,013
-------------------------------- ------------
Goodwill 6,099
-------------------------------- ------------
The fair value of the intangible assets represents the estimated
fair value of StingRay's order book, its customer relationships and
its brand. These have been valued using a discounted cash flow
model. The deferred consideration has been discounted using the
company's weighted average cost of capital.
The goodwill arising on acquisition reflects items not
separately recognised, including the expertise of StingRay's
employees and their contacts in target markets.
Post-acquisition, the acquired business contributed GBP1.1
million of revenue and GBP0.3 million of profit after tax excluding
central costs to the consolidated income statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFVRRLIEIID
(END) Dow Jones Newswires
June 06, 2017 02:00 ET (06:00 GMT)
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