REG - Gooch & Housego PLC - Preliminary Results

Gooch & HousegoAnnouncement

27/11/2018 07:05

RNS Number : 5483I
Gooch & Housego PLC
27 November 2018
 






For immediate release


27 November 2018




 
Gooch & Housego PLC
("Gooch & Housego", "G&H", the "Company" or the "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2018
Gooch & Housego PLC (AIM: GHH), the specialist manufacturer of optical components and systems, today announces its preliminary results for the year ended 30 September 2018.
 
 




Year ended 30 September


2018


2017


Change




Revenue (£m)


124.9


112.0


11.5%




Adjusted profit before tax (£m)*


18.8


16.1


16.4%




Adjusted basic earnings per share (pence)*


57.2


49.4


15.8%




Statutory profit before tax (£m)


10.1


12.6


(19.8%)




Basic earnings per share (pence)


29.3


36.4


(19.5%)




Total dividend per share (pence)


11.3


10.2


10.8%




Net (debt) / cash (£m)


(10.6)


14.9


(25.5)




*adjusted figures exclude the amortisation of acquired intangible assets, impairment of goodwill, adjustments to accrued contingent consideration, exceptional items being restructuring costs, site closure costs, transaction costs, and interest on deferred consideration.
Operating & Strategic Highlights
·      A backdrop of generally favourable market conditions in our three main sectors of industrial, aerospace & defence and life sciences / biophotonics.
·      Demand was high for critical components used in microelectronic manufacturing. Hi- reliability fibre couplers used in undersea cable networks down overall, though came back strongly in the latter part of the year.
·      Strategically important investments were made in order to increase capacity in industrial and medical lasers and to exploit areas of R&D identified as having high growth potential for our photonic technologies.
·      Considerable progress was made towards our strategic goals of further diversification and moving up the value chain, including the acquisitions of ITL and Gould Fiber Optics in August and September 2018 respectively.
 
Financial Highlights
·      Revenue 11.5% higher than FY 2017, 11.1% excluding foreign exchange and acquisitions / disposals.
·      Adjusted profit before tax up 16.4%.
·      Adjusted basic earnings per share up 15.8%
·      £24m invested in acquisitions and capital expenditure of £7.2m. Net debt of £10.6m (c.0.5 X EBITDA)
·      Record year end order book of £96.1m, up 33% from 30 September 2017, 17% excluding foreign exchange and acquisitions/ disposals.
 
Mark Webster, Chief Executive Officer, commented
"G&H has had another good financial year. We have been able to take advantage of generally positive market conditions and continue to execute on our long term strategy.
"Our strong performance has enabled us to continue to invest in manufacturing capacity and R&D, as well as bringing complementary new technologies and customers into G&H through acquisitions.
"There has been some recent gradual softening in demand growth for critical components in microelectronic manufacturing, offset by a return to strong demand growth for our fibre optics business generally, and hi-reliability fibre couplers in particular.
"We remain aware of potential macroeconomic and political risks. Overall G&H has a robust order book combined with greater diversification. The Board remains confident that the Group is well positioned to continue to deliver further progress in FY2019 and beyond."
For further information please contact:




Gooch & Housego PLC


Mark Webster / Andrew Boteler


01460 256440




Investec Bank plc (Nomad & Broker)
Buchanan


Patrick Robb / David Anderson
Mark Court / Sophie Wills


020 7597 5970
020 7466 5000




 
 
Expected Financial Calendar
 




Annual General Meeting
 


20 February 2019
 




Payment date for final dividend for the year ended 30 September 2018 to shareholders on the register at close of business 25 January 2019.
Subject to approval by shareholders at the Annual General Meeting
 


1 March 2019
 




Interim Results announcement
 


June 2019
 




Financial Year End
 


30 September 2019
 




Preliminary announcement of results for the year ended
30 September 2019


November 2019
 




 
Chairman's Statement
 
2018 was another year of significant progress in the development of your company. Broadly favourable market conditions, combined with development programmes entering production,  generated another positive set of results, while we responded to unprecedented demand patterns in  some of our sites.  G&H delivered record revenues, adjusted profits and adjusted earnings per share in the year.
 
The business continued to execute well on its long standing strategies of diversification and moving up the value chain, enhanced by the acquisitions made during the year of VITL Ltd ("ITL") and Gould Fiber Optics ("GFO").  ITL will substantially increase the group's life sciences / biophotonics presence and provide a much improved systems capability. GFO consolidates G&H's position as a world leader in fused fibre technology and gives enhanced access to the US aerospace and defence sector.
 
During the year G&H accelerated its transformation programme and we enter next year with an organisation aligned to our target end clients in the industrial, life-sciences / biophotonics, and aerospace and defence sectors. Our manufacturing facilities have been brought together into four groups based on their underlying technology, each under dedicated leadership. This will enable an increased focus on investment in people, plant and processes and position the company well for future growth.
 
In successfully responding to the challenges of FY2018 an exceptional effort was required of many people. I would like to express my thanks to my fellow directors and to all employees of G&H.  During the year I took over from Gareth Jones as Chairman. On behalf of the Company and his colleagues I would like to thank Gareth for his huge contribution to G&H over the many years of his leadership both as CEO and then Chairman. Andrew Boteler, Chief Financial Officer, has informed the Board that he will retire in the summer of 2019 and step down from the Board.  I would like to thank Andy for the support he has given me, the Board and the company and wish him the best for the future. The company has appointed a specialist recruitment agency and has begun a search for a new Chief Financial Officer.
 
As the Group grows we are committed to continue to improve the quality of corporate governance and in September confirmed that we would apply the UK Corporate Governance Code to how we run the company. As a Board we are also very aware of the value of diversity and our need to improve women's representation at all levels. We are supportive of the approaches suggested in the Hampton-Alexander review and are committed to improve representation of women at the Board and in senior leadership positions in the Group. 
 
While we remain conscious of potential risks arising from macroeconomic challenges and the growth of global protectionism, your business enters the new financial year with a record order book and enhanced opportunities derived from the continued investment in new technologies, capabilities and routes to market. The Group is well positioned to continue to deliver in FY2019 and beyond.
 
 
Gary Bullard
Chairman
27 November 2018
 
Chief Executive Officer's Statement
FY2018 Performance
 
FY 2018 revenue of £124.9 million represents an increase of 11.5% over the previous year or excluding foreign exchange and acquisitions / disposals, an increase of 11.1%. Adjusted profit before tax was £18.8 million, an increase of 16.4% over the previous year.
 
Gooch and Housego enters the new financial year with a record order book, which, at 30 September 2018, stood at £96.1 million, an increase of 33% compared to the same time last year. Excluding the impact of foreign exchange and acquisitions and disposals this represents an increase of 17%.
 
The Company benefited from generally positive market conditions, particularly for critical components used in microelectronic manufacturing, which experienced unprecedented levels of growth. Despite a lower year overall for high reliability fused fibre products used in undersea cables, they performed well in the latter part of the year and exited with a strong order book.
 
Strategically important investments were made in people, processes, and "best in class" capital equipment during the year, allowing us to significantly increase capacity, especially at those sites supplying critical components used in microelectronic manufacturing.
 
G&H was able to make further investment in areas identified as having high growth potential for our photonic technologies such as the latest industrial laser systems, harsh environment sensing, unmanned aerial vehicles ("UAVs"), novel aerospace and defence programmes, space satellite communications, laser surgery and medical diagnostics.
 
We acquired two companies in the last two months of the financial year and they have strengthened our presence in life sciences and the aerospace and defence sector. The life science company, ITL, will enable us to move further up the value chain, with a much enhanced systems capability. Gould Fiber Optics allows enhanced access for our fibre products to US aerospace and defence markets.
 
Strategic goals
 
Considerable progress has been made towards our strategic goals of further diversification and moving up the value chain.
 
Aerospace and defence ("A&D") and life sciences both provide a counter balance to the exposure that the industrial laser sector has to the global economic cycle. Our main customers are the tier one A&D and medical diagnostic companies, who often prefer us to provide them with sub system and system solutions, providing a strong impetus to move up the value chain. This coupled with the regulatory and compliance hurdles inherent in A&D and life sciences, provides a very robust business model, with high barriers to entry. We are increasingly well placed to serve these companies.
 
Our aim is to achieve a 'critical mass' in both the A&D and life sciences sectors and in an 'ideal world' an equal split between the three main market sectors across G&H.
 
In large part this has been achieved in A&D, which represented 32.7% of FY 2018 revenue ( FY 2017: 31.1%). Life sciences has a smaller share of FY 2018 revenue, representing 8.9 % (FY 2017: 8.5%), but the acquisition of ITL should see life science revenue take a substantial step forward in FY 2019.
 
Sub systems and systems now represent 25.6% of our business ( FY 2017: 22.1%).
 
Acquisitions and disposals
 
Kent Periscopes, acquired in July 2016, performed well in FY2018 and have now substantially achieved their full earn out potential. StingRay Optics, acquired in February 2017, received the first part of its earn out payment, having exceeded its first performance target. We were pleased with the performance of both companies during FY 2018 and the way they have both integrated into G&H.
 
In August and September 2018 we acquired ITL and Gould Fiber Optics, respectively.
 
ITL is a UK based specialist in the design, development and manufacture of high quality medical devices. It enables G&H to double its life science business and move up the value chain, as all of ITL's sales come from system based products.
 
GFO is a US based market leading supplier of key enabling components to tier one US A&D customers. It provides a platform for G&H to obtain enhanced access for our fibre based business with Tier 1 US based aerospace & defence companies.   
 
Both acquisitions are very recent, but, so far, we are pleased with their performance and level of integration.
 
G&H shut down and sold most of the trade and assets of its Orlando light measurement business in September 2018. It was a non-core business and delivered marginal returns and made a small loss in FY2018. Its disposal will have a limited impact on future earnings.
 
Research and Development ("R&D")
 
There has been continued benefit from concentrating our R&D efforts on fewer higher return projects. During FY 2018 we introduced a record 29 new products and we expect the full value of these products to come to fruition over the next three years. Revenue generated from new products this year was £12.0 million (FY 2017: £11.1 million).
 
Good progress has been made in the areas which have been identified as offering the highest growth potential for our photonic technologies.
 
Microelectronic manufacturing is entering a new phase of ultra fast lasers, which allow for improved capabilities in existing areas of use and new areas, such as via drilling techniques and extreme UV lithography, which is utilised in the production of nanoelectronics. The next generation of precision lasers and laser systems are being developed with our laser manufacturer and laser system partners.
 
We have capitalised on our expertise and knowledge gained on space laser communications to provide solutions for applications such as harsh environment sensing which utilises our ruggedised photonic technologies. Two recent examples are projects in the areas of oil pipeline security and LIDAR wind detection for wind farms.
 
Unmanned aerial vehicles have a variety of commercial and military uses and this is an area where we see significant potential for G&H. We design, engineer and manufacture bespoke complex optical arrays, often in the IR spectrum, that form part of the imaging system contained in the UAV's gimbal. They typically provide targeting, surveillance and LIDAR capability.
 
Our space communication group has gone from strength to strength with European and UK space agency funded work as well as substantial commercial contracts to provide satellite communication systems for near term satellite launches. We believe there is significant potential to expand this technology into small satellite platforms for constellations and near space UAVs.
 
We have a number of ongoing R&D defence programmes in the US and Europe, which operate under ITAR regulations or confidentiality agreements, supporting future growth in what is now a substantial A&D business.
 
Our optical coherence tomography ("OCT") technology dominates the retinal scanning and imaging arena. The longer term development partnerships we have with medical diagnostic companies in the areas of cardiovascular disease and cancer detection are now moving to the prototype and early commercial model stage, with the prospect of new product launches in the near future.
 
Performance improvement programme
 
We have built on the work done in previous years to improve efficiency, customer service and to establish a more scalable organisational model for future growth. During FY 2018 eight of our sites were organised into three manufacturing centres. They are based on our sites' areas of technical expertise, namely Acousto Optic/ Electro Optic, Precision Optics and Fibre Optics. Each manufacturing centre has a leader and their role is to ensure best practice is shared, there is process harmonisation and optimal allocation of resource.
 
Kent Periscopes and StingRay Optics will form a fourth manufacturing centre, called Systems, in the new financial year. This will represent the next stage of assimilation of these relatively recent acquisitions into G&H.
 
The two latest acquisitions, ITL and GFO, will, in time, slot into the Systems and Fibre Optic manufacturing centres, respectively.
 
In FY 2019 we will introduce three customer facing business units, which will mirror our traditional market sectors of Industrials, A&D and Life Sciences / Biophotonics. Each of the business units will have a leader who will be responsible for the sector's strategy and longer term planning. They will work closely with the four manufacturing heads to ensure our production resources match the strategy and longer term planning.
 
This new approach will be underpinned by improved business systems. In the new financial year we will enter the second year of a phased introduction of new financial and business systems.
 
 
Markets and Applications
 
Industrial - 58.4% of FY18 revenue
 
The industrial division is composed of a diverse range of industrial applications aligned to our world class photonic technologies, including microelectronic manufacturing, semiconductor manufacturing and test, remote sensing, metrology and optical communications.
 
Our industrials division grew by £5.3 million or 7.8% compared to the previous year. For reporting purposes scientific research is now contained within the industrial sector, which is consistent with the previously discussed business units. Scientific research is a small, but prestigious and profitable area for G&H.
 
The two traditionally largest areas of the industrial division, industrial lasers and high reliability fused fibre products for undersea cables, performed very differently during FY 2018.
 
There was an unprecedented level of demand for critical components in precision lasers used for microelectronic manufacturing. This demand was driven, in large part, by the next generation of smart phones and tablets and the change in manufacturing technology required to make them. The technology is dependent on the latest solid state lasers being able to deliver a high level of precision. We worked closely with the laser manufacturers and laser system suppliers to meet demand and have, through a combination of investment and reorganisation of resources, made available substantial extra capacity for these products going forward.
 
The ongoing need for ever more data from government, industry and the consumer continues to drive a need for more telecommunication capacity. This is especially true for undersea cable networks where well-capitalised 'Silicon Valley' technology companies are sponsoring installation of their own dedicated hardware. Our ultra high- reliability fused fibre products are used in repeaters that are a key part of the undersea cable networks.
 
Our business in high- reliability fused fibre products underperformed in the year. This was due to delays in deployment of planned undersea networks in the first half of the year. The business though came back strongly in the latter part of the year, as the planned networks moved into their deployment phase and we have experienced good demand led growth for hi- reliability fused fibre products, with a robust order book, as at 30 September 2018.
 
Aerospace & Defence - 32.7% of FY18 Group Revenue
 
A&D grew year on year by £5.9 million or 17.0%. This was due to a combination of organic growth and the full year impact of the StingRay Optics acquisition.
 
G&H is now able to bring a wide range of photonic capabilities together that very much represent the "direction of travel" in this sector. These include target designation, range finding, ring laser and fibre optic gyroscopic navigational systems, infra-red and RF counter measures, periscopes and sighting systems for armoured vehicles and opto-mechanical sub systems for unmanned aerial vehicles.
 
The acquisition of GFO provides enhanced access for our fibre based business to tier one US A&D companies.
 
Delivering product quality, reliability and performance in challenging environments is essential in the A&D arena and this very much plays to G&H's strengths. Our customers encompass the major US and European A&D companies.
 
Space satellite communication is undergoing a technological revolution. The use of fibre optic lasers to transmit information means satellite communication systems are more efficient and robust, as well as being significantly lighter. This has changed the economics of the sector and has led to smaller satellites and encouraged the move towards the use of satellite constellations and near space UAVs, as part of a communications network. The investment we have made in this segment allows us to contribute at the forefront of these developments globally.
 
Our Moorpark site, which has historically been profitable, remains key to our aerospace and defence business. However, it has recently struggled to grow its business during some difficult times in the commercial aerospace sector which has seen price pressure from a key customer.  Whilst recent investment, improvements in the site's operational set up, the adoption of LEAN manufacturing principles, and diversification of its customer base are moving the site in a favourable direction, an impairment of £2.7m has been recognised in respect of the carrying value of the goodwill relating to this site.
 
Life Sciences / Biophotonics - 8.9% of FY18 Group Revenue
 
Life sciences  / biophotonics revenue grew year on year by £1.6 million or 17.2%.
 
The principal applications are in OCT, laser surgery and microscopy. OCT is widely used in ophthalmology for 3D retinal scanning and G&H has a dominant position in supplying critical components and sub systems to the main equipment suppliers. We also have a number of R&D collaborations with medical diagnostic companies in cardiovascular and cancer detection.
 
Laser surgery is a fast growing segment particularly in ophthalmology, prostate and cosmetic surgery and has significant potential to be exploited beyond these current areas of use.
 
The acquisition of ITL, in August 2018, has the potential to be transformative for G&H in this sector. It will double the life science  / biophotonics revenue and their greater electronic, software and mechanical engineering capability will substantially enhance our ability to present our photonic technology as part of a sub- system or system to our medical diagnostic customers.
 
There is potential for photonic technology to be used in minimally invasive surgery, endoscopy and robotic surgery and this segment remains an area where G&H will continue to invest in R&D and to look for further strategic acquisitions.
 
Appointment of Non-Executive Chairman and CFO succession
 
In December 2017 we announced that Gary Bullard was to be appointed to the Board at the Annual General Meeting in February 2018. He was duly appointed and has had a successful period in the post.
 
Gareth Jones stepped down as Non- Executive Chairman after 37 years of loyal service with the Company. On behalf of myself and G&H, I would like to thank Gareth for his wisdom and guidance as Chairman and for his immense contribution to G&H's growth as a business over many years. All his friends and colleagues at the Company wish him well in the future.
 
After more than 10 years as CFO and some 12 years in G&H, Andy Boteler has decided to step down as a public company executive. Andy has been an important part of G&H's success over many years and his deep knowledge of the business, energy and considerable ability will be missed. Everyone at G&H wishes him well in his future endeavours. As part of a managed succession process, a specialist recruitment agency has been appointed. Andy has committed to stay on until we have a successor in place.
 
 
Outlook
 
G&H has had another good year. We were able to take advantage of generally positive market conditions and meet our financial goals. At the same time we made substantial investments in people, process and "best in class" equipment in order to increase capacity in industrial and medical lasers, invested in R&D projects identified as delivering a high return for our photonic technologies and brought on board complementary new technologies and customers through acquisitions. Considerable progress was made towards our strategic goals of diversification and moving up the value chain.
 
We will continue an active policy towards creating a more diverse and balanced business by building "critical mass" in A&D and life sciences / biophotonics, through a mix of investment in R&D and acquisitions.
 
G&H is committed to making further investment in R&D in target areas that we believe represent the highest growth potential for our photonic technologies. These include the latest industrial laser systems, harsh environment sensing, UAVs, novel A&D programmes, space satellite communications, laser surgery and medical diagnostics.
 
We will continue to execute on our performance management programme with the aim of improving operational efficiency, customer service and putting in place a scalable organisational model that will provide a platform for future growth. The introduction, in FY 2019, of the fourth manufacturing centre, based around systems and three customer facing business units, will be the next step in this process.
 
There has been some recent gradual softening in demand growth for critical components used in microelectronic manufacturing, offset by a return to strong demand growth for our fibre optics business generally and hi-reliability fibre couplers in particular.
 
We remain aware of the current potential macroeconomic and political risks. Overall G&H has a robust order book, combined with greater diversification. The Board remains confident that the Company is well positioned to deliver further progress in FY 2019 and beyond. 
 
 
 
Mark Webster
Chief Executive Officer
27 November 2018  
 
Performance Overview
 
The business has once again delivered strong and profitable growth.
 
Group revenue for the year was a record £124.9 million.  This represents an increase of £12.9 million, or 11.5% over the previous year of £112.0 million. 
 
In August and September 2018 Gooch & Housego acquired ITL and the trade and assets of Gould Fiber Optics respectively, which combined, contributed £2.5 million to group revenue in the year.  Additionally, the full year incremental benefit of our 2017 acquisition, StingRay Optics LLC, was £3.0m.
 
In September 2018, G&H sold the majority of the trade and assets of its Orlando, Florida facility. In FY 2018 the Orlando business contributed £5.0 million to Group revenue with marginal profitability. The cost of closing the site, net of disposals proceeds was £1.6m.
 
Our organic revenue, net of acquisitions and disposals, was up by 6.6%. Excluding foreign exchange and acquisitions / disposals revenue growth was 11.1%, a higher rate of growth than the previous year. 
 
During 2018, G&H invested £6.0 million in property, plant and equipment and £24.0 million in acquisitions.  This has resulted in the business moving into a net debt position of £10.6 million as at 30 September 2018 compared to a net cash position of £14.9 million, as at 30 September 2017. This represents approximately 0.5 X EBITDA.
 




REVENUE


 


 


 


 




 


 


 


 


 




 


2018


 


2017




Year ended 30 September


£'000


%


 


£'000


%


 




Industrial


72,881


58.4%


 


67,586


60.4%


 




Aerospace & Defence


40,789


32.7%


 


34,860


31.1%


 




Life Sciences / biophotonics


11,213


8.9%


 


9,570


8.5%


 




Group Revenue


124,883


100%


 


112,016


100%


 




 
In the financial year under review, adjusted operating profits increased by £2.7 million to £19.1 million (2017: £16.4 million). At a percentage margin level, adjusted operating margins were 15.3%, compared to 14.6% in 2017.
 
 
 
In our Industrial segment, revenue grew by 7.8%, in absolute terms, from £67.6 million last year to £72.9 million this year.  On a constant currency basis this sector increased by 12.6%.  
 
Revenue in our aerospace & defence business increased by 17.0% in absolute terms from £34.9 million to £40.8 million. Excluding the acquisition of Gould Fiber Optics and the full year impact of our 2017 acquisition, A&D revenue increased by 7.7%. Excluding foreign exchange and acquisitions / disposals this sector increased by 12.0% in the year. 
 
Life sciences / biophotonics revenue increased by 17.2% in absolute terms from £9.6 million to £11.2 million.  Excluding the acquisition of ITL, life science / biophotonics revenue fell by 6.2%. Excluding foreign exchange and acquisitions / disposals this sector was broadly flat year on year.
 




GROUP EARNINGS PERFORMANCE


 


 


 


 




All amounts in £'000


Adjusted


 


Reported




Year ended 30 September


2018


2017


 


2018


2017


 




Operating profit


19,100


16,406


 


10,796


13,278


 




Net finance costs


(343)


(295)


 


(683)


(676)


 




Profit before taxation


18,757


16,111


 


10,113


12,602


 




Taxation


(4,677)


(4,059)


 


(2,893)


(3,710)


 




Profit for the year


14,080


12,052


 


7,220


8,892


 




Basic earnings per share (p)


57.2p


49.4p


 


29.3p


36.4p


 




 
The Group adjusted profit before tax amounted to £18.8 million (2017: £16.1 million) and represented a margin of 15.0%.  Statutory profit before tax was £10.1 million compared with £12.6 million last year.
 
The adjusted effective rate of tax was 24.9% (2017: 25.2%). The reduction in the rate was due to US tax reforms, offset to a large extent by a greater proportion of the group's profits being subject to state taxes in the US. The effective rate of tax of 28.6% (2017: 29.4%) was higher than the adjusted effective rate because of the effect of the goodwill impairment, which is not subject to tax, and which was partially offset by the one-off gain on re-measurement of the US deferred tax liabilities following the reduction of the US tax rate.
 
The rate reflects a combination of the varying tax rates applicable throughout the countries in which the Group operates, principally the UK and the USA. 
 
Adjusted earnings per share (EPS) increased from 49.4p in FY2017 to 57.2p in FY2018.  Reported basic EPS was 29.3p compared with 36.4p last year.
 




RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES




 




 


Operating profit


Net finance costs


Taxation


Earnings
per share




Year ended 30 September


2018
£000


2017
£000


2018
£000


2017
£000


2018
£000


2017
£000


2018
pence


2017
pence




Reported


10,796


13,278


(683)


(676)


(2,893)


(3,710)


29.3p


36.4p




Amortisation of acquired intangible assets


2,141


2,202


-


-


(276)


(168)


7.6p


8.3p




Site closure


1,569


-


-


-


(359)


-


4.9p


-




Impairment of goodwill


2,708


615


-


-


-


-


11.0p


2.5p




Charge / (credit) in respect of accrued contingent consideration


417


(615)


-


-


-


-


1.7p


(2.5p)




Restructuring costs


864


536


-


-


(169)


(105)


2.8p


1.8p




Transaction fees


605


390


-


-


(116)


(76)


2.0p


1.3p




Interest on deferred consideration


-


-


340


381


-


-


1.4p


1.6p




Tax credit on US deferred tax due to rate change


-


-


-


-


(864)


-


(3.5p)


-




Adjusted


19,100


16,406


(343)


(295)


(4,677)


(4,059)


57.2p


49.4p




 
NON GAAP MEASURES
 
The Company uses a number of non GAAP measures which are shown in the table above and in the segmental analysis.  These measures are used to illustrate the impact of non-recurring and non-trading items on the Company's financial results.  These are the impact of the amortisation of acquired intangible assets, costs associated with restructuring activities, impairment of goodwill, adjustments to contingent consideration, costs associated with the acquisition and disposal of subsidiary companies, and the interest charge on deferred consideration.
 
RESEARCH & DEVELOPMENT (R&D)
 
Gooch & Housego continues to invest in R&D and regards this as fundamental to the continued growth of the company.  There were a record 29 product releases in 2018, together with 4 new patents granted.
 
Expenditure on R&D in FY2018 increased by 2.4% from £8.6 million to £8.8 million.  R&D expenditure represented 7.1% of revenue (2017: 7.7%).  The Group capitalised £0.6m of development expenditure (2017: £0.7 million).



OPERATIONS
 
In September 2018 G&H shut down its Orlando, Florida, light measurement business. Most of the trade and assets of the business have been sold. It was a non-core business and in the recent past had delivered marginal returns. This business made a small loss in FY 2018.  The cost of closing this facility, net of the sale of the majority of the trade & assets is £1.6 million in 2018.  The Orlando property is owned by G&H and is being marketed for sale in FY2019.  It is expected that following the sale of the property, the overall site closure will be cash neutral. Both the closure costs and any future profit on sale of the building will be treated as adjusting items.
                  
As reported in 2017, the Company won its legal dispute with the landlord of its Fremont facility, as a result of which, a Californian court awarded G&H in the region of $2 million in damages plus costs, arising from the landlord's non-performance in respect of the lease. The landlord has commenced an appeal against this ruling and whilst legal opinion remains confident that the original ruling will be upheld, no recognition of the damages award has been made in this set of financial statements. Any net benefit will be treated as an exceptional item.
 
As part of the plan to position G&H for future growth the business is in the process of being reorganised.  As outlined in our FY2017 Annual Report, our manufacturing sites have been organised into manufacturing centres. In addition to the three areas of technical expertise, namely Acousto Optic / Electro Optic, Precision Optics and Fibre Optics announced in FY2017, G&H is also adding Systems as the fourth manufacturing centre, announced in FY2018. Each manufacturing area has a leader and their role is to ensure best practice is shared, there is process harmonisation and optimal allocation of resources. In FY2018 the business has also announced three business units that mirror our traditional market sectors of Industrial, A&D and Life Sciences / Biophotonics.  These business units will provide a market facing focus, tailored to the specific needs of these discrete and often very diverse market sectors. The fourth manufacturing centre and the three new business units will be introduced in the new financial year.
 
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 August 2018 G&H acquired ITL. This acquisition expands the Company's presence in the life sciences sector and further enables G&H's move into system based products. 
 
Founded in 1977, ITL is a UK based specialist in the design, development and manufacture of high quality medical and in vitro diagnostic (IVD) devices. ITL is a market leading supplier with an established group of long standing multi-national customers. It provides full product development, design, manufacturing and after sale service for the commercialisation of medical diagnostic, analytical, precision electro-mechanical and laboratory instruments.
 
ITL is headquartered in Ashford, Kent, with manufacturing sites in Ashford and Shanghai, China, plus a US client servicing capability based in Virginia, USA. This acquisition enables G&H to take a significant step towards meeting its strategic objectives, including doubling the revenue of its life science business and accelerating the Company's move up the value chain, with all of ITL's sales coming from system based products. ITL's core group of electronic, software and mechanical engineers, provides an enhanced platform on which G&H can expand its systems capabilities.
Over time there are a number of potential benefits that will accrue from ITL becoming part of G&H. These include leveraging G&H's commercial footprint in the US, China and Far East and combining the Company's photonic expertise with ITL's high level systems capability in order to provide a more attractive product offering to G&H's medical diagnostic customer base.   
 
Acquired in quarter 4, ITL has performed well, contributing £2.2 million to group revenue and £0.5 million in profit before tax in the year.
 
In September 2018 G&H acquired the trade and assets of Gould Technology LLC, trading as Gould Fiber Optics. This acquisition strengthens G&H's position as the world leader in fused fibre optic technology and provides enhanced access to strategic US aerospace and defence customers.
 
Founded in 1978 and headquartered in Baltimore, MD, USA, GFO is a specialist in the design, development and manufacture of fibre optic components and sub systems. GFO is a market leading supplier of key enabling components into tier 1 US Aerospace and Defence customers. The GFO product range is highly complementary to that of G&H. Whilst G&H is the leading manufacturer of high reliability undersea fused fibre optic components, together with a strong presence in the life sciences and fibre laser markets, GFO specialises in the supply of polarisation maintaining ("PM") fibre components to the US defence market.
 
As GFO was acquired very late in the financial year its contribution to the 2018 results has been minimal, adding circa £0.3 million to group revenue and a marginal contribution to profit. 
 
This acquisition enables G&H to take another step towards meeting its strategic objective of further diversification in its core markets. GFO brings the technology and routes to market required for G&H to access the US aerospace and defence fibre optic market. In turn G&H's much larger US salesforce/ business development group and the combined broader based product portfolio should provide the platform for greater expansion within this sector.
 
As a result of an excellent trading performance in 2018, Kent Periscopes has substantially achieved its full earn out potential. Consequently, the provision for a proportion of this payment previously released in 2017, has been charged to the income statement for the current year. 
 
NON TRADING ITEMS
 
Restructuring costs of £0.9 million (FY2017: £0.5 million) related to the legal dispute associated with the re-location of our Palo Alto facility to Fremont and to restructuring costs arising from the re-organisation of the manufacturing centres and the introduction of the customer facing business units.
 
Transaction costs of £0.6 million relate to the acquisition of ITL and Gould Fiber Optics.
 
Site closure costs relate to the closure of the Company's Orlando facility. These comprise inventory write off costs and personnel expenses, net of the proceeds received.
 
Provision of contingent consideration of £0.4 million related to the Kent Periscopes acquisition meeting its full earn-out.
 
As part of its annual review of the carrying value of goodwill, the Board has taken the decision to impair the goodwill of the General Optics acquisition. General Optics, now referred to as Gooch & Housego Moorpark, was acquired in October 2008 for a consideration of $21m and, prior to the impairment, the carrying value of the associated goodwill was £6.4m.  Over the last ten years this acquisition has played a vital role in Gooch & Housego's diversification strategy, by providing the knowledge and routes to market required for the Group to become a credible player in the Aerospace and Defence market.  However, on a stand-alone basis, Moorpark has recently struggled to grow its business during some difficult times in the commercial aerospace sector which has seen price pressure from a key customer.  Whilst recent improvements in the site's operational set up, the adoption of LEAN manufacturing principles, and diversification of its customer base, are moving the performance of Moorpark in a favourable direction, an impairment charge of £2.7m has been recognised in relation to the carrying value of the Moorpark goodwill.
 
BALANCE SHEET
 
The Group's total equity at the end of the year was £107.8 million, an increase of £9.7 million over the prior year.  This increase comprised £4.6m from retained earnings, £2.7m from issues of share capital and a net increase of £2.4m from foreign exchange and other movements.
 
Additions to property, plant and equipment totalled £6.0m (excluding acquisitions).  The main additions related to investment in plant and machinery to deliver the capacity requirements in 2018.
 
Working capital was 27.4% of revenue in the current year compared to 19.2% in 2017, due to higher inventory levels required to cope with the volume increase and a heavy weighting of shipments towards the end of the financial year driving up accounts receivable. This metric has also been affected by the two acquisitions and one site closure in the later part of the year.  Excluding these the working capital was 24.6%.
 
Inventory at year end was £24.4 million, an increase of £3.4 million over the prior year. Excluding the impact of the inventory attributable to the acquisitions and site closure, the underlying inventory increased by £2.3 million, or 10.7%, in the year. This increase is reflective of the increased activity in the year.
 
Trade receivables at year end were £32.2 million, an increase of £11.7 million over the prior year. Excluding the impact attributable to the acquisitions and site closure, the underlying receivables increased by £8.7 million, or 42.6%, in the year. This increase was due a heavier than normal weighting of shipments in Q4. There has been good cash collection post year end.
 
Cash balances at 30 September 2018 were £19.4 million, compared with £26.4 million in the prior year. Net cash flows from operating activities totalled £9.2 million, compared with £17.6 million last year, reflecting a cash generated from operations to adjusted operating profit rate of 62.6% (2017: 119%) as a result of the increase in the working capital position.  During the year the business moved from a net cash position of £14.9 million to a net debt position of £10.6 million, as a result of investing £24.0 million in the acquisitions and £6.0m in property, plant and equipment.
 
In August 2018 G&H re-financed its banking facilities with its existing bankers, Natwest.  The new arrangement, set for a three year term, comprises a committed $40 million revolving credit facility and an uncommitted $20 million accordion facility.
 
MOVEMENT IN NET CASH / (DEBT)




All amounts in £m


Gross
Cash


Gross
Debt


Net
Cash/ (Debt)




At 1 October 2017


26.4


(11.5)


14.9




Operating cash flows


20.7


-


20.7




Debt drawdown


17.3


(17.3)


-




Acquisitions / (disposals)


(23.6)


(0.4)


(24.0)




Net capital expenditure


(7.2)


-


(7.2)




Working capital


(8.8)


-


(8.8)




Interest, tax and dividends


(5.7)


-


(5.7)




Exchange movement


0.3


(0.8)


(0.5)




At 30 September 2018


19.4


(30.0)


(10.6)




 
ORDER BOOK
 
As at 30 September 2018, the Group order book stood at £96.1 million, compared to £72.1 million at the end of the 2017 financial year, a 33% increase.  The net effect of the acquisitions and disposal added £10.3 million to the order book. Excluding foreign exchange and acquisitions / disposals the order book was 17% higher.  The book to bill ratio for the business as a whole was 0.95 (six month rolling average) as at 30 September 2018 (2017: 1.08). This partly reflects the strong shipments in Q4.
 
STAFF
 
The Group workforce increased from 823 at 30 September 2017 to 1,007 at the end of September 2018, an increase of 184. This is a net position and therefore reflects both the work the business has done in driving efficiency improvements and the additional headcount that has come from the recent acquisitions and investment in capacity.
 
DIVIDENDS
 
The Directors propose a final dividend of 7.1p per share making a total dividend per share for the year of 11.3p (2017: 10.2p), an increase of 10.8%.  The final dividend, if approved, will be payable on 1 March 2019 to shareholders on the Company's share register as at the close of business on 25 January 2019.
 
 
KEY PERFORMANCE INDICATORS (KPIs)
 
The Group objective is to deliver sustainable, long-term growth in revenue and profits.  This is to be achieved through the execution of the Board's strategies.
 
In striving to achieve these strategic objectives, the main financial performance measures monitored by the Board are:
 




Total revenue growth


2018


2017


2016




At actual exchange rates


12%


30%


9%




At constant exchange rates


16%


19%


3%




 
The Board is focused on driving revenue growth by investing both organically and through acquisitions.  The Group business has delivered strong underlying growth.
 




Target market revenue


2018


2017


2016




Aerospace & Defence  (£m)


40.8


34.9


20.0




Life Sciences (£m)


11.2


9.6


7.9




 
The Group targeted markets of Aerospace & Defence and Life Sciences provide a route to sustainable growth, and a more diversified revenue base. These markets also provide significant opportunities for Gooch & Housego to migrate up the value chain from materials and components to higher value sub-assemblies, modules and systems in response to the trend for our larger customers to outsource increasingly complex parts of their business.  The increase in A&D revenue includes the full year effect of last year's acquisition, StingRay Optics LLC, combined with a small contribution from Gould Fiber Optics in 2018.
 




Net (debt) / cash analysis


2018


2017


2016




Net (debt) / cash (£m)


(10.6)


14.9


11.7




 
In order to balance business risk with the investment needs of the Company, management closely monitors and manages net cash/(debt).  This year, following the acquisition of ITL and Gould Fiber Optics and the investment in capital assets the net cash reduced from a net cash position of £14.9 million to a net debt position of £10.6 million.  This represents a Net Debt : EBITDA ratio of c. 0.5.
 




Earnings per share (EPS)


2018


2017


2016




Adjusted diluted EPS (pence)


56.5p


48.5p


41.7p




 
As a result of a strong trading performance, the business has been able to deliver growth in adjusted diluted EPS of 16.5%, from 48.5p to 56.5p in 2018.
 
Group Income Statement
For the year ended 30 September 2018 (unaudited)




 


 


2018


2017




 


Note


£000


£000




Revenue


2


124,883


112,016




Cost of revenue


 


(74,811)


(65,937)




Gross profit


 


50,072


46,079




Research and Development


 


(8,229)


(8,119)




Sales and Marketing


 


(9,237)


(9,459)




Administration


 


(22,317)


(16,937)




Other income and expenses


 


507


1,714




Operating profit


2


10,796


13,278




Finance income


 


16


27




Finance costs


 


(699)


(703)




Profit before income tax expense


 


10,113


12,602




Income tax expense


3


(2,893)


(3,710)




Profit for the year


 


7,220


8,892




 


 


 


 




Basic earnings per share
 


4


29.3p


36.4p




Diluted earnings per share


4


29.0p


35.8p




 
 
Reconciliation of profit before tax to adjusted profit before tax:
 




 


 


 


2018


2017




 


 


 


£000


£000




Profit before tax


 


 


10,113


12,602




Amortisation of acquired intangible assets


 


 


2,141


2,202




Charge / (release) re accrued contingent consideration


 


 


417


(615)




Impairment of goodwill


 


 


2,708


615




Site closure costs


 


 


1,569


-




Restructuring costs


 


 


864


536




Transaction fees


 


 


605


390




Interest on discounted deferred consideration


 


 


340


381




Adjusted profit before tax


 


 


18,757


16,111




 
 
Group Balance Sheet
For the year ended 30 September 2018 (unaudited)




 


 


2018


2017




 


Note


£000


£000




Non-current assets


 


 


 




Property, plant and equipment


 


38,320


33,890




Intangible assets


 


65,734


40,250




Deferred income tax assets


 


1,944


2,703




 


 


105,998


76,843




Current assets


 


 


 




Inventories


 


24,445


21,078




Income tax assets


 


-


267




Trade and other receivables


 


35,028


24,723




Cash and cash equivalents


 


19,433


26,425




 


 


78,906


72,493




Current liabilities


 


 


 




Trade and other payables


 


(25,262)


(23,758)




Borrowings


 


(75)


(6)




Income tax liabilities


 


(309)


(579)




Provision for other liabilities and charges


 


(988)


(888)




Deferred consideration


 


(5,774)


(4,286)




 


 


(32,408)


(29,517)




 


 


 


 




Net current assets


 


46,498


42,976




 


 


 


 




Non-current liabilities


 


 


 




Borrowings


 


(29,964)


(11,492)




Deferred income tax liabilities


 


(6,322)


(5,938)




Deferred consideration


 


(8,363)


(4,253)




 


 


(44,649)


(21,683)




 


 


 


 




Net assets


 


107,847


98,136




 


 


 


 




Shareholders' equity
Capital and reserves

attributable to equity shareholders


 


 


 




Called up share capital


 


4,982


4,903




Share premium account


 


15,530


15,530




Merger reserve


 


7,262


4,640




Cumulative translation reserve


 


7,231


5,574




Retained earnings


 


72,842


67,489




Total equity


 


107,847


98,136




 
 
Group Statement of Changes in Shareholders' Equity
For the year ended 30 September 2018 (unaudited)
 
 




 


 
 
 
Note


 
 
 
Called up share

capital
£000


 
 
 
Share

premium

account

£000




 
 
 
Merger

reserve

£000


 
 
 
 
Retained earnings

£000


 
 
 
Cumulative translation reserve £'000


 
 
 
 
Total
equity
£000
 




At 1 October 2016


 


4,852


15,530


2,671


60,135


6,984


90,172




Profit for the financial year


 


-


-


-


8,892


-


8,892




Other comprehensive expense for the year


 


-


-


-


-


(1,410)


(1,410)




Total comprehensive income for the year


 


-


-


-


8,892


(1,410)


7,482




Dividends


5


-


-


-


(2,289)


-


(2,289)




Shares issued


 


51


-


1,969


(15)


-


2,005




Fair value of employee services


 


-


-


-


587


-


587




Tax credit relating to share option schemes


 


-


-


-


179


-


179




Total contributions by and distributions to owners of the parent recognised directly in equity


 


51


-


1,969


(1,538)


-


482




At 30 September 2017


 


4,903


15,530


4,640


67,489


5,574


98,136




At 1 October 2017


 


4,903


15,530


4,640


67,489


5,574


98,136




Profit for the financial year


 


-


-


-


7,220


-


7,220




Other comprehensive income for the year


 


-


-


-


-


1,657


1,657




Total comprehensive income for the year


 


-


-


-


7,220


1,657


8,877




Dividends


5


-


-


-


(2,647)


-


(2,647)




Shares issued


 


79


-


2,622


(45)


-


2,656




Fair value of employee services


 


-


-


-


675


-


675




Tax credit relating to share option schemes


 


-


-


-


150


-


150




Total contributions by and distributions to owners of the parent recognised directly in equity


 


79


-


2,622


(1,867)


-


834




At 30 September 2018


 


4,982


15,530


7,262


72,842


7,231


107,847




 


 


 


 


 


 


 


 



 
 
 
 
 
 
 
 
 
 
 
 
 



 
 
Group Statement of Comprehensive Income
For the year ended 30 September 2018 (unaudited)
 




 


 


2018


2017




 


Note


£000


£000




 


 


 


 




Profit for the year


 


7,220


8,892




 


 


 


 




Other comprehensive income / (expense) - items that may be reclassified subsequently to profit or loss


 


 


 




Currency translation differences


 


1,657


(1,410)




Other comprehensive income / (expense) for the year net of tax


 


1,657


(1,410)




 


 


 


 




Total comprehensive income for the year attributable to the shareholders of Gooch & Housego PLC


 


8,877


7,482




 


 


 


 




 


 


 


 




 
 
Group Cash Flow Statement
For the year ended 30 September 2018 (unaudited) 
 




 


 


2018


2017




 


 


£000


£000




Cash flows from operating activities


6


 


 




Cash generated from operations


 


11,949


19,526




Income tax paid


 


(2,779)


(1,957)




Net cash generated from operating activities


 


9,170


17,569




 


 


 


 




Cash flows from investing activities


 


 


 




Acquisition of subsidiaries, net of cash acquired


 


(24,029)


(5,658)




Disposal of trade and assets


 


384


-




Purchase of property, plant and equipment


 


(5,849)


(5,799)




Sale of property, plant and equipment


 


-


29




Purchase of intangible assets


 


(1,377)


(604)




Interest received


 


9


27




Interest paid


 


(304)


(326)




Net cash used in investing activities


 


(31,166)


(12,331)




 


 


 


 




Cash flows from financing activities


 


 


 




Drawdown of borrowings


 


17,272


5,918




Repayment of borrowings


 


(16)


(5,523)




Dividends paid to ordinary shareholders


 


(2,647)


(2,289)




Net cash generated from / (used in) financing activities


 


14,609


(1,894)




 


 


 


 




Net (decrease) / increase in cash


 


(7,387)


3,344




Cash at beginning of the year


 


26,425


23,167




 
Exchange gains / (losses) on cash


 


395


(86)




Cash at the end of the year


 


19,433


26,425




 
 
Notes to the preliminary report
 
1.         Basis of preparation
 
The unaudited Preliminary Report has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 30 September 2018.  
 
The Preliminary Report does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006 and has not been audited.  
 
Comparative figures in the Preliminary Report for the year ended 30 September 2017 have been taken from the Group's audited statutory financial statements on which the Group's auditors, PricewaterhouseCoopers LLP, expressed an unqualified opinion.
 
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2017, as described in those financial statements. New standards or interpretations which came into effect for the current reporting period did not have a material impact on the net assets or results of the Group.
 
The Preliminary Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 27 November 2018. Copies will be available to members of the public upon application to the Company Secretary at Dowlish Ford, Ilminster, Somerset, TA19 0PF.
 
 
2.             Segmental analysis
 
The Company's segmental reporting reflects the information that management uses within the business.  The business is divided into three market sectors, being Aerospace & Defence, Life Sciences / Biophotonics and Industrial, together with the Corporate cost centre.
 
The industrial business segment primarily comprises the industrial laser market for use in the semiconductor and microelectronic industries, but also includes other industrial applications such as metrology and telecommunications.  The Scientific Research sector, which covers academic and government funded research including major multi-national projects, was merged with the Industrial sector in the year.
 
 




 


Aerospace & Defence


Life Sciences / Bio-photonics


Industrial


Corporate


Total




 


£000


£000


£000


£000


£000




For year ended 30 September 2018


 


 


 


 


 




Revenue


 


 


 


 


 




Total revenue


41,023


11,440


80,363


-


132,826




Inter and intra-division


(234)


(227)


(7,482)


-


(7,943)




External revenue


40,789


11,213


72,881


-


124,883




Divisional expenses


(34,454)


(9,189)


(59,146)


(1,757)


(104,546)




EBITDA¹


6,335


2,024


13,735


(1,757)


20,337




EBITDA %


15.5%


18.1%


18.8%


-


16.3%




Depreciation and amortisation


(758)


(399)


(2,450)


(1,085)


(4,692)




Operating profit before amortisation of acquired intangible assets and goodwill impairment


5,577


1,625


11,285


(2,842)


15,645




Amortisation of acquired intangible assets and goodwill impairment


-


-


-


(4,849)


(4,849)




Operating profit


5,577


1,625


11,285


(7,691)


10,796




Operating profit margin %


13.7%


14.5%


15.5%


-


8.6%




Add back non-recurring items, amortisation of acquired intangibles and goodwill impairment


116


17


1,030


7,141


8,304




Adjusted operating profit


5,693


1,642


12,315


(550)


19,100




Adjusted profit margin %


14.0%


14.6%


16.9%


-


15.3%




Finance costs


-


-


-


(683)


(683)




Profit before income tax expense


5,577


1,625


11,285


(8,374)


10,113




 
 




 


Aerospace & Defence


Life Sciences / Bio-Photonics


Industrial


Corporate


Total




 


£000


£000


£000


£000


£000




For year ended 30 September 2017


 


 


 


 


 




Revenue


 


 


 


 


 




Total revenue


34,860


9,570


74,661


-


119,091




Inter and intra-division


-


-


(7,075)


-


(7,075)




External revenue


34,860


9,570


67,586


-


112,016




Divisional expenses


(29,880)


(8,165)


(53,238)


(1,389)


(92,672)




EBITDA¹


4,980


1,405


14,348


(1,389)


19,344




EBITDA %


14.3%


14.7%


21.2%


-


17.3%




Depreciation and amortisation


(715)


(388)


(2,136)


(625)


(3,864)




Operating profit before amortisation of acquired intangible assets


4,265


1,017


12,212


(2,014)


15,480




Amortisation of acquired intangible assets, gain on bargain purchase and goodwill impairment


-


-


-


(2,202)


(2,202)




Operating profit


4,265


1,017


12,212


(4,216)


13,278




Operating profit margin %


12.2%


10.6%


18.1%


-


11.9%




Add back amortisation of intangibles, impairment of goodwill, and non-recurring items


-


-


-


3,128


3,128




Adjusted operating profit


4,265


1,017


12,212


(1,088)


16,406




Adjusted profit margin %


12.2%


10.6%


18.1%


-


14.6%




Finance costs


-


-


-


(676)


(676)




Profit before income tax expense


4,265


1,017


12,212


(4,892)


12,602




 
 
 
¹EBITDA = Earnings before interest, tax, depreciation and amortisation
 
Management have added back the amortisation of intangibles, impairment of goodwill, restructuring costs, site closure costs, charge / release in respect of contingent consideration and transaction fees in the above analysis. This has been shown because the Directors consider the analysis to be more meaningful excluding the impact of these non-recurring expenses.
 
All of the amounts recorded are in respect of continuing operations.
 
 
Analysis of net assets by location:
 




 


2018


2018


2018


2017


2017


2017




 


Assets


Liabilities


Net Assets


Assets


Liabilities


Net Assets




 


£000


£000


£000


£000


£000


£000




United Kingdom


93,311


(56,955)


36,356


75,104


(32,612)


42,492




USA


90,382


(19,999)


70,383


73,641


(18,477)


55,164




Continental Europe


495


(42)


453


545


(98)


447




Asia Pacific


716


(61)


655


46


(13)


33




 


184,904


(77,057)


107,847


149,336


(51,200)


98,136




 
For the year to 30 September 2018 non-current asset additions were £3.8m (2017: £1.9m) for the UK and for the USA £3.6m (2017: £4.5m). There were no additions to non-current assets in respect of Europe (2017: £nil) or the Asia Pacific region (2017: £nil). The value of non-current assets in the USA was £62.4m (2017: £47.9m), the United Kingdom £45.7m (2017: £29.0m) and Europe £nil (2017: £nil). There were no non-current assets in the Asia-Pacific region.
 
 
Analysis of revenue by destination:




 


 


 


2018
£000


2017
£000




United Kingdom


 


 


21,081


18,624




North America


 


 


44,899


45,485




Continental Europe


 


 


29,788


24,233




Asia Pacific and Other


 


 


29,115


23,674




Total revenue


 


 


124,883


112,016




 
 
3.             Income tax expense
 
 
Analysis of tax charge in the year




 




 


2018

£000


2017

£000




Current taxation


 


 


 




UK Corporation tax


 


1,895


1,318




Overseas tax


 


1,381


2,165




Adjustments in respect of prior year tax charge


 


-


(1,315)




Total current tax


 


3,276


2,168




 


 


 


 




Deferred tax


 


 


 




Origination and reversal of temporary differences


 


481


227




Adjustments in respect of prior year deferred tax


 


-


1,315




Impact of change in the US tax rate


 


(864)


-




Total deferred tax


 


(383)


1,542




 


 


 


 




Income tax expense per income statement


 


2,893


3,710




 


 


 


 




 
4.             Earnings per share
 
The calculation of earnings per 20p Ordinary Share is based on the profit for the year using as a divisor the weighted average number of Ordinary Shares in issue during the year.  The weighted average number of shares for the year ended 30 September is given below:




 


2018


2017




Number of shares used for basic earnings per share


24,629,591


24,457,701




Dilutive shares


265,817


412,901




Number of shares used for dilutive earnings per share


24,895,408


24,870,602




 
 
A reconciliation of the earnings used in the earnings per share calculation is set out below:




 


2018


2017




 


£000


pence
per share


£000


pence
 per share




Basic earnings per share


7,220


29.3p


8,892


36.4p




Amortisation of acquired intangible assets (net of tax)


1,865


7.6p


2,034


8.3p




Goodwill impairment


2,708


11.0p


615


2.5p




Charge / (release) re accrued contingent consideration


417


1.7p


(615)


(2.5p)




Site closure costs (net of tax)


1,210


4.9p


-


-




Restructuring costs (net of tax)


695


2.8p


431


1.8p




Transaction fees (net of tax)


489


2.0p


314


1.3p




Interest on deferred consideration


340


1.4p


381


1.6p




One off credit due to US tax rate change


(864)


(3.5p)


-


-




Total adjustments net of income tax expense


6,860


27.9p


3,160


13.0p




Adjusted basic earnings per share


14,080


57.2p


12,052


49.4p




 


 


 


 


 




Basic diluted earnings per share


7,220


29.0p


8,892


35.8p




Adjusted diluted earnings per share


14,080


56.5p


12,052


48.5p




 
Basic and diluted earnings per share before amortisation and other adjustments has been shown because, in the opinion of the Directors, it provides a useful measure of the trading performance of the Group.
 
 
5.             Dividends
 




 


 


2018

£000


2017

£000




Final 2017 dividend paid in 2018: 6.5p per share (Final 2016 dividend paid in 2017: 5.7p per share)


 


1,608


1,383




2018 Interim dividend paid: 4.2p per share (2017: 3.7p)


 


1,039


906




 


 


2,647


2,289




The Directors propose a final dividend of 7.1p per share making the total dividend paid and proposed in respect of the 2018 financial year 11.3p (2017: 10.2p). 
 
 
 
6.             Cash generated from operating activities




Reconciliation of cash generated from operations


 


 


 




 


 


2018
£000


2017
£000




Profit before income tax


 


10,113


12,602




Adjustments for:


 


 


 




- Amortisation of acquired intangible assets


 


2,141


2,202




- Amortisation of other intangible assets


 


683


199




- Proceeds from sale of trade and assets


 


(384)


-




- Impairment of goodwill


 


2,708


615




- Charge / (release) re accrued contingent consideration


 


417


(615)




- Depreciation


 


4,009


3,664




- Share based payment charge


 


675


587




- Amounts claimed under the RDEC


 


(370)


(370)




- Finance income


 


(16)


(27)




- Finance costs


 


699


703




Total


 


10,562


6,958




Changes in working capital


 


 


 




- Inventories


 


(1,295)


(1,442)




- Trade and other receivables


 


(7,847)


(1,465)




- Trade and other payables


 


416


2,873




Total


 


(8,726)


(34)




 


 


 


 




Cash generated from operating activities


 


11,949


19,526




 




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END
 
 
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