REG - Gooch & Housego PLC - Interim Results <Origin Href="QuoteRef">GHH.L</Origin>

Gooch & HousegoAnnouncement

07/06/2016 07:05

RNS Number : 3559A
Gooch & Housego PLC
07 June 2016
For immediate release
7 June 2016
GOOCH & HOUSEGO PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 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 
38.4m
38.9m
Adjusted profit before tax1
5.6m
6.3m
Adjusted basic earnings per share 1
17.0p
19.3p
Net cash 
12.3m
11.9m
Statutory profit before tax 
3.5m
5.1m
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 39.1 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 - 5.6 million invested in the Group's facilities and equipment and 3.5 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:
Gooch & Housego PLC 
Mark Webster / Andrew Boteler
01460 256 440
Buchanan 
Mark Court / Sophie Cowles
020 7466 5000
Investec Bank plc (Nomad & Broker)
Patrick Robb / David 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 31 March
2016

2015

'000
% of total 

'000
% of 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 38.4 million, a fall of 0.6 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 39.1 million (31 March 2015: 34.6 million) and the Company has booked 41.1 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 3.5 million in research & development. This represents 9.1% of revenue and is 8% higher than the same period last year (2015: 3.2m). 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 0.9 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 leanmanufacturing environment across all of our sites is set to deliver efficiency savings in 2016 and the drive for fewer moreproductive R&D projects combined with enhanced business development support has started todeliver 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 Profit
Net finance costs
Taxation
Earnings
per share
Half Year to 31 March
2016
000
2015
000
2016
000
2015
000
2016
000
2015
000
2016
pence
2015
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 5.6 million, down 11.1% on the prior year (H1 2015: 6.3 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 2.9 million, compared with 5.8 million in the same period of 2015. 1H 2016 operating cash flows include a net cash outflow of 0.9 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 0.3 million to 16.3 million since the year end.
Capital expenditure on property, plant and equipment was 5.6 million in the period (2015: 1.1 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 12.3 million, down from 17.3 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


Note
Half Year to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to 
30 Sep 2015
(Audited)


'000
'000
'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 to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to 30 Sep 2015
(Audited)


'000
'000
'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 Income
Half Year to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to 30 Sep 2015
(Audited)

'000
'000
'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
(Unaudited)
31 Mar 2015
(Unaudited)
30 Sep 2015
(Audited)


'000
'000
'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 Equity
Share
capital
account
000
Share
premium
account
000

Merger
reserve
000
Hedging 
reserve
000
Retained 
earnings
000
Total
equity
000
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 to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to 30 Sep 2015
(Audited)


'000
'000
'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 Flow Statement

Half Year to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to
30 Sep 2015
(Audited)


'000
'000
'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 to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to
30 Sep 2015
(Audited)


'000
'000
'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
Oct 2015

Cash flow
Exchange movement
At 31 Mar 
2016

'000
'000
'000
'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 & Defence
Life Sciences
Industrial
Scientific Research
Corporate
Total
For half year to 31 March 2016
'000
'000
'000
'000
'000
'000
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
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 & Defence
Life Sciences
Industrial
Scientific Research
Corporate
Total
For half year to 31 March 2015
'000
'000
'000
'000
'000
'000
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
1,321
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%
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 to 
31 Mar 2016
(Unaudited)

Half year to 
31 Mar 2015
(Unaudited)

'000

'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 to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to 30 Sep 2015 (Audited)


'000
'000
'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 to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to 30 Sep 2015
(Audited)

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 to
31 Mar 2016 (Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to
30 Sep 2015
(Audited)

'000
p per
share
'000
p per
share
'000
p per
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 to
31 Mar 2016
(Unaudited)
Half Year to
31 Mar 2015
(Unaudited)
Full Year to 30 Sep 2015
(Audited)

'000
'000
'000
Final 2015 dividend paid : 5.2p per share
1,254
-
-
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
No.
2015
No.
2016
'000
2015
'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
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