REG - Gooch & Housego PLC - Results for the year ended 30 September 2023
05/12/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231205:nRSE6366Va&default-theme=true
RNS Number : 6366V Gooch & Housego PLC 05 December 2023
For immediate release 5 December 2023
Gooch & Housego PLC
("Gooch & Housego", "G&H", the "Company" or the "Group")
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2023
Gooch & Housego PLC (AIM: GHH), the specialist manufacturer of photonic
components and systems, today announces its audited results for the year ended
30 September 2023.
Year ended / as at 30 September 2023 2022 Change
Revenue (£m) 148.5 124.8 19.0%
Adjusted profit before tax (£m)* 9.6 8.1 17.5%
Adjusted basic earnings per share (pence)* 31.3p 27.2p 15.1%
Statutory profit / (loss) before tax (£m) 5.0 (2.3) £7.3m
Basic earnings / (losses) per share (pence) 16.1p (8.0)p 24.1p
Total dividend per share (pence) 13.0p 12.6p 3.2%
Net debt excluding IFRS16 (£m) 20.9 12.8 £8.1m
Net debt (£m) 31.7 19.1 £12.6m
· Adjusted figures exclude the amortisation of acquired intangible assets,
impairment of goodwill and acquired intangible assets, non-underlying items
being site closure costs, costs of acquisitions and disposals and
restructuring costs, together with the related tax impact. A reconciliation of
adjusted figures to reported figures is shown in the Financial Review Section.
Key points
· Strategy - a new strategy launched focusing on four pillars of
People, Self Help, Technology and Investment to deliver mid-teen return on
sales over the mid-term.
· Revenue - up 19% or 13.6% on an organic, constant currency basis
to £148.5m (FY2022: £124.8m).
· Profit - adjusted operating profit up 28.0% to £11.3m (FY2022:
£8.9m). Reported profit before tax up to £5.0m (FY2022: loss of £2.3m).
· Order book - order book returning to normalised levels at
£124.1m (FY2022: £147.7m). Book-to-bill ratio in the second half of 1.04x.
· Acquisitions - the acquisitions of GS Optics and Artemis
completed during the year. The integration of both businesses into the Group
is progressing well.
· Debt - net debt increased to £31.7m (FY2022: £19.1m) of which
bank debt was £20.9m (FY2022: £12.8m) reflecting investment in acquisitions.
Group leverage remains comfortable at 1.1x.
· Dividend - Full year dividend of 13.0p (FY2022: 12.6p) reflecting
the Board's confidence in the growth potential of the Group.
· Outlook - the Group is well positioned in structurally growing
markets. Our order book gives us good visibility for FY2024 and we are
confident we will deliver further profitable growth in the coming year.
Charlie Peppiatt, Chief Executive Officer, commented:
"FY2023 has been a year of strong growth for G&H reflecting the
significant improvements that have been made in operational output.
"While mindful of the uncertain macroeconomic and geopolitical landscape,
G&H remains well positioned with a robust pipeline across all our end
markets and a fully deployed clear new strategy to deliver sustainable profit
growth."
For further information please contact:
Charlie Peppiatt, Chief Executive Officer Gooch & Housego PLC +44 (0) 1460 256440
Chris Jewell, Chief Financial Officer
Mark Court / Sophie Wills / Abigail Gilchrist Buchanan +44 (0) 20 7466 5000
G&H@buchanan.uk.com (mailto:G&H@buchanan.uk.com)
Christopher Baird / David Anderson Investec Bank plc +44 (0) 20 7597 5970
Analyst Meeting and Webcast
A meeting for analysts will be held today at 10.30am at the offices of
Buchanan, 107 Cheapside, London EC2V 6DN. To register attendance, please
contact Buchanan at G&H@buchanan.uk.com (mailto:G&H@buchanan.uk.com) .
A live audio webcast of the meeting will be available via the following link:
https://stream.buchanan.uk.com/broadcast/6549f8b66eba922222a2eef3
(https://stream.buchanan.uk.com/broadcast/6549f8b66eba922222a2eef3)
Following the meeting, a recording of the webcast will be made available for
replay at the Group's website at https://gandh.com/investors/
(https://gandh.com/investors/) .
2024 Expected Financial Calendar
Annual General Meeting 21 February 2024
Interim results announcement June 2024
Financial year end 30 September 2024
Full year results announcement December 2024
Chairman's Statement
Group Overview
I am very pleased with the Group's performance in FY2023. Under the leadership
of our new Chief Executive, Charlie Peppiatt, significant progress was made in
improving the operational performance of the business. Through focused actions
we were able to fill many of the open roles created by the record order book
secured by the Group. As a result, we improved our on-time delivery
performance and reduced our lead times.
Along with the operational improvements delivered from our own facilities, our
suppliers also contributed materially to the significant level of on time
delivery improvement compared with the prior year. In particular our Asian
contract manufacturing partner provided us with significant additional
capacity for many of the Group's acousto-optic products. We are building upon
this firm foundation by qualifying them for the manufacture of some of the
Group's fibre optic units and I am pleased to report that during the year and
after the long qualification programme that is required for such
hi-reliability products, they achieved their first deliveries of fused fibre
couplers direct to our customers.
Thanks to these measures the Group was able to increase its revenues by 19.0%
compared with the prior year and deliver a 28.0% increase in underlying
operating profit.
Strategy Refresh
In June 2023 the team presented the results from a thorough refresh of the
Group's strategy. Despite the impact in recent years of growing competition in
some of our markets on the Group's financial performance, we are well
positioned in fast growing markets that can offer the possibility for superior
returns. Whilst the profitability of the Group over the past few years has
been disappointing, some of which has been driven by our own operational
shortcomings, our new strategy sets out a path to deliver a return to
sustainable margin growth by positioning G&H in our growing end markets as
an innovative customer focused technology company.
There will be a relentless focus on building long-term partnerships with our
customers through both superior operational performance and by providing them
with our new and exciting technologies that address their most complex
photonic needs. As an enabler we have refreshed our product development
roadmaps to ensure we focus our resources on fewer activities thereby
accelerating the time to market for the developments that offer the best
returns.
Our suppliers will have an important part to play in helping us deliver on
this strategy. We have been clear that we expect to increase the proportion of
the Group's revenues that will come from product fully outsourced to our
contract manufacturing partners. To achieve this we have invested further
resources in our supply chain teams and have permanently located G&H
employees in our main contract manufacturing supplier's facilities to ensure
this partnership is successful.
Ultimately the success of the strategy depends upon the skills and expertise
of my colleagues in G&H. I am always extremely proud of their hard work
and dedication. During the recent difficult times they have risen to every
challenge. The significant progress made by the Group during the year would
not have been possible without them. I am also delighted that thanks to the
Group's growth we have been able to offer new, high quality employment
opportunities to colleagues at all stages in their careers.
Focused Investment
In delivering the Group's strategy, the Board is focused on the efficient use
of capital. We have continued to invest in R&D to embed ourselves in our
customers' next generation programmes but we are also prepared to make careful
use of the balance sheet to support inorganic growth. We were delighted to be
able to complete the acquisitions of both GS Optics and Artemis during the
year. The addition of both companies to the G&H family provides the
opportunity to drive significant synergies and is aligned to key areas of
focus outlined in our new strategy. The integration of both companies into
G&H is progressing well and I was pleased to see during my recent visit to
GS Optics' facility in Rochester the additional space that we have taken on
that campus to accommodate our ITL medical and diagnostics device production
activities in the US.
The Environment
The Group's products are playing their part in the migration to a more
sustainable and healthier world. Our medical diagnostic products help with the
earlier diagnosis of disease and illness ultimately leading to better patient
outcomes whilst our sensing products are integral to the efficient generation
of clean, renewable energy. We are committed to achieving net zero for our
scope 1 & 2 emissions by 2035 and made further significant steps towards
that target in the financial year. Our carbon intensity measure which records
our volume adjusted emissions reduced by 33.2%. With the development of the
renewable energy market in the US we are now able to make progress in
migrating our US sites to purchase their energy from renewable sources
following the lead given by our UK sites where all of our purchased
electricity now comes from renewable sources.
We also recognise the importance of supporting the communities in which we
operate. As well as providing high quality, skilled jobs we encourage our
employees to support local charities, often matching with G&H monies the
amounts they raise.
Board
We were delighted to welcome Susan Searle to join the Board as a new
Non-Executive Director in April 2023. Susan brings strong experience of
commercialising new technologies as well as a broad base of other expertise
including ESG matters. I am sure she will make a strong contribution to the
further growth of the Group.
Recognising the importance the Board places upon ensuring the long term
sustainability of the Group we have established a new Sustainability Committee
of the Board. Susan will chair this committee which will focus on the
integration of the Group's financial objectives with its social and
environmental ambitions. We will also explore the establishment of targets
around some of the Group's scope 3 emissions.
As a Board we take our governance responsibilities very seriously and so I was
delighted to see our further progression in this area was recognised by rating
agency MSCI, which has now placed us in the highest scoring range relative to
our global peers for our corporate governance practices.
Dividend
Given the progression of the Group in the year and the long-term positive
outlook for the business underpinned by the work completed during the year to
refresh the Group's strategy, the Board is proposing a final dividend of 8.2
pence per share for approval at the Company's Annual General Meeting on 21
February 2024, giving a total of 13.0 pence for the year. Payment of the
dividend will be made on 23 February 2024, to shareholders on the register as
at 19 January 2024. The Board is committed to growing the level of dividend
cover.
Outlook
The strategic objectives that support the return of the Group to mid-teens
profitability over the mid-term are in place and already delivering benefits.
Our customers recognise us for the quality of our products and the skills of
our people. The Group is well positioned in structurally growing markets.
Our order book gives us good visibility for FY2024 and we are confident we
will deliver further profitable growth in the coming year.
Gary Bullard
Chairman
5 December 2023
Chief Executive Officer's Statement
Introduction
FY2023 has been a year of strong growth for G&H reflecting the significant
improvements that have been in operational output. This has been complemented
by the number of new customer wins and incremental business opportunities with
existing customers. The growth in revenue and the continued strong order
intake also reflect multi-year programme wins and the positive structural
trends evident in many of our end markets. Our teams across the Group have
executed exceptionally well in the continuing challenging environment, given
the significant supply chain and cost headwinds, to deliver a strong trading
performance with improved profit growth in line with expectations. Having
completed my first full year with G&H, I am pleased with the progress that
has been made across the business through the collective hard work of the
workforce harnessed more effectively through our new strategy that was
launched in the summer.
I am proud that G&H products are playing a part in building a better more
sustainable world. Many of our products contribute directly to the reduction
of energy consumption and the more efficient use of materials. In our own
facilities we are also making great strides in reducing our impact on the
environment. In FY2023 we achieved a 20.5% reduction in our emissions as we
work towards our goal of being net neutral on our Scope 1 and 2 emissions by
2035.
Business Performance
Following the positive performance reported in the first half, the Group
sustained strong trading momentum during the second half of the year enhanced
by the focused operational improvements and capability investment over the
last year. For the full financial year 2023 G&H achieved revenues of
£148.5m, representing an increase of 19% over the previous year (FY2022:
£124.8m), or on an organic, constant currency basis saw growth of 13.6%.
Adjusted profit before tax was £9.6m, an increase of 17.5% over last year
(FY2022: £8.1m). At the same time, we saw continued strong levels of customer
demand albeit at more normalised levels resulting in order book stabilising at
£124.1m (FY2023 £147.7m) and positive book-to-bill ratio in the second half
of the year at 1.04x. There has been further extension of the order book
following the year end.
Strategy
Over the last year many of my first impressions have been confirmed, that
G&H is a company with outstanding products, enormous technical capability
and highly talented people that required greater focus on operational
execution, customer experience, employee engagement and better prioritisation
of valuable R&D technology investment.
Following a full strategic review of the business during the first half of the
year, in the Summer 2023 we launched a refreshed strategy across the Group to
ensure that the business is focused in the right product development areas
aligned to customer-led growth drivers, it is 'easier to do business with
G&H' ensuring long-term profitable customer partnerships and we achieve
greater disciplined focus on superior operational execution to avoid repeating
the manufacturing and supply chain problems of the recent past.
Our new strategy is now focused on delivering sustainable margin growth and
transforming G&H to become an 'innovative customer focussed technology
company' delivered responsibly by making a 'better world with photonics'. We
seek to ensure that G&H becomes and remains the 'first choice' for all our
stakeholders whether they are our employees, our customers, our shareholders,
our eco-system partners or the communities where we operate. We will offer
differentiated performance through the four pillars of our strategy centred
around firstly, our people by establishing dynamic high performance teams and
a purpose-led culture. Secondly through self-help activities to deliver
exceptional customer service and superior operational execution. Thirdly,
through value creation from our technology and photonics expertise and finally
by focused investment, both organic and inorganic, to accelerate accretive
growth.
Acquisitions
The Group's new strategy has identified a path to mid-teens returns over the
medium term that includes benefits from our 'portfolio' achieved through
addressing non-performers in combination with pursuing 'speed to value'
acquisitions. During 2023 I was delighted to be able to announce the
completion of two back-to-back strategic acquisitions of GS Optics and Artemis
Optical. These acquisitions marked a significant milestone and alignment with
G&H's strategic vision for growth through a greater focus on adding value
through the transition from complex photonics components to a sub-system or
full system solution by targeting two businesses that enhance our fuller
photonics systems offering in A&D, advanced industrial or Life Sciences
markets with a focus on gaps that we have in coating, complex systems
assembly, new materials and specifically our Life Sciences footprint in North
America. Both acquisitions are already proving an excellent fit in terms of
our commitment to precision, innovation and customer focus confirming their
potential to support the growth of the Group.
Our markets
Industrial demand continued to be strong, especially the semiconductor and
industrial laser markets, where underlying market growth was complemented by
very good uptake of new G&H products launched in those market areas.
Demand for our hi-reliability fibre couplers remained robust, with the use of
those products in the growing satellite communications market complementing
the long-standing undersea cable business.
Life Sciences performed well and we saw continued growth in demand for our
products used in medical lasers and our medical diagnostic products. A cancer
care product initially designed by our customer and then productionised by our
engineering team migrated through regulatory approvals and into production
during the year and we expect to see further growth from this product in
FY2024.
Volumes in our Aerospace & Defence markets grew significantly as a result
of improved productive capacity at several of our sites and a number of
projects move into production phase. Our imaging and sighting systems business
for armoured vehicles and UAVs continues to progress well with a number of
multi-year new programme wins during FY2023 where the conflict in Ukraine is
fuelling increased demand and greater urgency of supply.
Following the transfer of our acousto-optic products from our Ilminster
facility to our Asian contract manufacturing partner, we have now qualified
and successfully transferred the manufacture of some of our hi-reliability
fibre coupler business to that same partner. With the appointment of a new VP
of Supply Chain and Contract Manufacturing during FY2023, we are looking to
accelerate the transfer of further opportunities to outsource several other
products, where technological sovereignty is not a differentiator, building
upon the successful partnership that we have now established.
We have continued to invest in our technology roadmaps albeit it with greater
focus following the recent strategic review and are working closely with many
of our customers on their next generation products. New products contributed a
record £26.1m of revenue in FY2023 (FY2022: £17.9m).
The Group retained high levels of inventory during FY2023, similar to last
year, as a risk reduction exercise given the ongoing difficult supply chain
environment. Although this is expected to improve in FY2024 we don't expect it
to return fully to pre-pandemic levels in the next 12 months.
This combined with the funding of the two acquisitions resulted in net debt
excluding lease liabilities increasing to £20.9m from £12.8m. Our leverage
as measured for our banking covenant stands at 1.1x (2022 0.7x), which along
with available committed and uncommitted bank facilities of $35.4m places
G&H in a strong position to pursue our strategic goals.
Research and Development (R&D)
G&H continues to work closely within the global photonics ecosystem and
with a number of key partners to develop their next generation products.
During FY2023 we introduced 57 new products (FY2022: 54) and delivered £26.1m
of revenue (FY2022 £17.9m) from new products. Following our strategic review,
we are refocusing and prioritising our R&D effort and investment behind
the following seven vital few areas:
· Expansion of AO technologies into Semiconductor and EUV.
· New medical laser technologies and applications.
· Advanced fibre technology supporting submarine networks.
· Imaging and sighting systems.
· Added value around our precision optics and optical coatings
capability.
· Moving up the value chain in Fibre-Optics with a focus on
sensing, modules, LiDAR.
· Medical diagnostics and bio-photonics IVD solutions.
The projects are expected to contribute £50m of incremental margin accretive
revenue over the plan period.
Corporate Responsibility
The Board is accountable to its shareholders and is committed to the highest
standards of corporate governance. To this end the Company has adopted the UK
Corporate Governance Code (2018). In order to ensure the Company is meeting
the most up to date standards regular reviews of policy are held by the
relevant committees of the Board of Directors. During the year the Board
undertook a self-assessment to identify opportunities for improvement and
incorporate a greater focus on ESG. We were pleased to welcome Susan Searle to
join the Board during the year with her wealth of experience in many of the
markets in which we operate. Susan also assumed the role of Chair for our
newly introduced Sustainability Committee.
G&H is committed to creating a safe, engaging, diverse and inclusive place
to work for the Company's employees and all stakeholders. We continue to
establish a culture that proactively works towards reducing harm and promotes
equality, diversity and inclusion across the company. The Company remains
focused on providing equal employment opportunities for all and aims to
improve diversity at all levels of the organisation. Our recruitment partners
have been instructed to ensure that they include women in all shortlist
applications and we are actively engaged with encouraging International Women
in Engineering.
G&H is committed to conducting our business in an environmentally
responsible and sustainable manner. With the appointment of our new
non-executive director we have established a Sustainability Committee
responsible for monitoring the Group's achievement against its ESG targets. We
are investing in order to generate our electricity in a sustainable manner and
to reduce our overall energy usage. Each of our sites has an energy reduction
plan that it is working to. In the year we reduced our scope 1 and 2 carbon
emissions by 20.5%, a major step forward in achieving our target of being net
neutral on this measure by 2035. We were also pleased to see two sites,
Ilminster and Torquay, join our Fremont site with certification to the
environmental ISO14001 standard. As part of our new strategy, we have deployed
a road map to roll this same initiative out across all our manufacturing sites
by 2027. The Executive Directors and senior leadership team all have specific
environmental management and carbon reduction goals in their remuneration
schemes.
Outlook
FY2023 was a year of strong operational, strategic and financial progress. We
delivered excellent top line growth for the Group through improved operational
execution on our record order book, which reflected a significant number of
new customer wins, incremental business opportunities with existing customers
and market share gains. Our teams across the Group have performed
exceptionally well in a year characterised by significant change, ongoing
supply chain issues and continued cost inflation.
At the same time, we have completed our strategic review and deployed a clear
new plan for G&H to become an innovative customer focused technology
company delivered responsibly by making a 'better world with photonics' and
ensuring that G&H becomes and remains the 'first choice' for all our
stakeholders whether they are our employees, our customers, our shareholders,
our eco-system partners or the communities where we operate. G&H is
well-aligned with the prevailing global mega trends, many underpinned by the
next frontier of photonics, that is driving demand from high-growth markets.
Despite the strength of the order book across the business that provides good
visibility for FY2024, we still face some operational and commercial headwinds
in the near term. The labour markets for talent in both the UK and US remain
highly competitive leading to ongoing supply side challenges that continue to
frustrate the recruitment of the required talent, especially in engineering
and technical positions. Global supply chain constraints continue to persist
alongside an inflationary environment for wages, material costs and energy.
Whilst price increases have been passed onto customers in the second half of
FY2023 to address these cost increases, cost inflation continues to impact the
business. Nevertheless we expect to be able to offset cost base inflation
through pricing actions in the coming financial year.
While mindful of the increasingly uncertain macroeconomic and geopolitical
landscape, G&H remains well positioned for growth with a robust pipeline
across all our end markets. The business will invest to ensure G&H can
capitalise on the accelerating deployment of photonics technologies into
continuously expanding areas of the industrial, life sciences, aerospace and
defence markets underpinning the future growth potential of the Group.
I am confident we will build on the progress made in our financial and
operational performance as well as the clear direction from our new strategy
to progress to become a resilient and agile higher margin business over the
coming years for all our stakeholders and realise our clear vision of 'A
Better World with Photonics'.
Charlie Peppiatt
Chief Executive Officer
5 December 2023
Operations Review
Industrial
Revenue
£77.1m (FY2022: £64.6m)
Adjusted Operating Profit £10.5m (FY2022: £8.4m)
Adjusted Operating Margin 13.6% (FY2022: 13.0%)
Operating Profit £9.3m
(FY2022: £7.3m)
Percentage of Revenue 51.9% (FY2022: 51.7%)
Market Drivers
· Cloud computing, artificial intelligence, hyper connectivity and
automation all drive demand for semiconductors.
· Political uncertainties driving the re-shoring of the manufacture
of key components such as semiconductors.
· Next generation products such as EUV lithography lasers for
nanoelectronics and new design germanium modulators.
· New flexible materials being used for the next generation
personal data devices require new forms of industrial laser cutting and
marking machines.
· Increasing transfer of data internationally for both business and
personal use drives the demand for subsea data cables.
· Accelerating investment in wind generated clean energy particular
in the US. Our 'laser engine' sensing technology improves the efficiency of
wind turbines.
· Remote border and infrastructure asset protection receiving
increasing investment driving demand for our sensing products.
Our products enable
· Industrial lasers for materials processing applications. G&H
supplies Q-switches and other acousto-optic, electro-optic and fibre optic
products.
· Semiconductor for lithography and test and measurement
applications.
· Metrology for laser-based, high-precision, non-contact
measurement systems.
· Optical communications specifically for high reliability and
high-performance applications.
· Remote sensing for applications including asset protection,
perimeter security, strain, temperature and pressure sensing.
· Scientific research the largest proportion being nuclear fusion
research and energy - laser technology is being used to recreate the
conditions found in the core of the sun.
Our strategy in action
With investment and focus on our recruitment activities we were able to solve
many of the resourcing problems that had impacted the Group in the previous
year. We looked at our benefits packages to make sure we were an attractive
place to work for our existing and new employees.
The work we have done with our supply chain supported additional capacity for
our deliveries in to the Industrial markets in FY2023. We completed the
qualification our contract manufacturing partner in Asia for the production of
hi-reliability fused couplers in addition to the acousto-optic products they
are already making for us.
The result was a significant step up in output compared with the prior year
and a reduction in our overdue backlog. Our customers are seeing our on time
performance improve and our lead times reduce.
Overall, sales of products into our Industrial markets grew by 19.5% (15.3%
excluding foreign exchange) compared to the prior year. Revenue growth into
our semiconductor markets was particularly strong as we delivered against the
very strong order book we brought into FY2023. Our FY2023 revenue into this
market included our first deliveries for fibre optic splitter units used in
the world's most advanced deep and extreme ultraviolet semiconductor
lithography machines. This customer programme is forecast to increase in
volume in the coming years.
Revenues into our core industrial laser market also grew strongly. Demand for
our germanium acousto-optic modulator used in the Q switching of solid-state
lasers was particularly strong. In the second half of the year we saw some
evidence of over stocked positions amongst some of our distributor customers
who were asking for either a slow down or pause in deliveries to them whilst
they normalised their inventory holding. This market is ultimately driven by
end consumer demand primarily for personal electronics and this market tends
to be naturally cyclical. We are monitoring closely the demand picture in this
market to ensure we make operational capacity adjustments in a timely manner.
Our performance in the sensing market in the year was also strong with
revenues growing by around one third. Our laser engines provided by our
Torquay facility are our core offering into this market and two significant
end customer programmes ramped up in FY2023 after a quieter performance in
FY2022. Our customers' end programmes are for border, perimeter and pipeline
monitoring and protection. We are also seeing growing demand for our sensing
products that are critical to the safe and efficient operation of wind
turbines. We secured an important new contract win with Europe's largest wind
turbine provider who rely upon us for the laser engine that controls their
wind turbine systems.
Revenues for our hi-reliability fused coupler products used in subsea data
cables grew marginally in FY2023 compared with the prior year. As noted above
we completed the qualification of our Asian contract manufacturing partner for
the production of these products during the year and first deliveries were
made from them direct to some of our customers. This opens up a third source
of supply for these products and in particular offers the possibility for some
margin expansion on this product line. We now have the capability to offer
significantly more capacity for these products to our fibre laying customers
and we are hopeful of securing a greater proportion of our customers' needs.
Strategic priorities for FY2024
· We have recently invested in further product management resources
for our acousto- and electro-optic products which form the majority of our
product offerings in to the Industrial market. This will enable us to further
collaborate with our customers and invest our R&D in the areas that
address their most demanding needs.
· We will bring new products to the market and ensure that we
remain at the cutting edge of technology in this growing market. During FY2023
G&H introduced 12 new products in Industrials generating £10.6m of
revenue.
· We will work with our low-cost contract manufacturing partners to
outsource more products to them in order to support our margin expansion and
to extend the lives of these products. This will support us offering our
customers additional capacity and shorter lead times.
· We will focus on niche markets that play to the strengths of
G&H, principally those that demand high levels of quality and reliability,
typically requiring technically challenging design and engineering input
incorporating a range of our products. Those markets may require survivability
in harsh environments.
· We will leverage our technology roadmaps to transition from being
a components supplier to a manufacturer of subassemblies, instruments and
systems.
Aerospace & Defence
Revenue
£38.6m (FY2022: £30.6m)
Adjusted Operating Loss £(2.3)m
(FY2022: £(2.7m))
Adjusted Operating Margin (6.0%)
(FY2022: (8.7%))
Operating
Loss
£(2.9)m (FY2022: £(3.4m))
Percentage of Revenue
26.0% (FY2022: 24.5%)
Market Drivers
· The Ukraine conflict has driven further investment in both
armoured vehicles and unmanned aerial vehicles (UAV) and measures to counter
them.
· Users require new features within their latest optical systems
that integrate electronics and optics in single more complex packages.
· Optics used in the defence arena increasingly require complex
coatings, for which G&H is a leading supplier.
· Photonic components and systems offer size, weight, power and
reliability benefits for multiple A&D sub sectors.
· IR optical arrays are used for targeting, range finding,
navigation and surveillance capabilities for both UAV and counter measures.
· These same capabilities are needed in the operation of remotely
controlled and autonomous A&D systems for land, sea and air.
· Space satellite communication systems are migrating from
traditional radio frequency to laser-based systems. G&H's laser amplifier
technology sits at the heart of these systems.
· Directed energy systems have already been deployed on to naval
platforms as part of their integrated defence systems. Significant investment
is being made by Western governments in more powerful laser systems for other
applications within and beyond naval warfare.
Our products enable
· Target designation and range finding used on both land-based and
airborne systems.
· Guidance and navigation components for ring laser gyroscope and
fibre optic gyroscope inertial navigation systems.
· Countermeasures for ground-based systems and airborne platforms.
· Space photonics G&H is leveraging its heritage of ultra-high
reliability components for both space and very high altitude unmanned aerial
vehicle applications in order to address the growing market for laser-based
space communications.
· Periscopes and sighting systems for land based armoured fighting
vehicles.
· Opto-mechanical subsystems for unmanned aerial and ground
vehicles.
· Directed energy systems for military platform and infrastructure
defence applications.
· Advanced optical coatings for both laser protection and platform
stealth
· Acrylic optics for low weight, less expensive optics as required
for solider, body worn system such as night vision goggles and rifle scopes.
Our strategy in action
FY2023 saw significant improvements in our on time delivery to this market
thanks to resolving some of the staffing issues that had resulted from our
operational footprint restructuring programme over the previous two years. Our
customers saw a reduction in lead times and an improvement in our on time
delivery performance. We were rewarded by receiving a greater share of some of
our larger customers' overall needs.
Important milestones were achieved in the development of our next generation
periscopes systems which are to be deployed on the upgraded Challenger tank
platform and on some of our export programmes.
We were delighted to be able to complete the acquisition of Artemis in July
2023. The opportunity to combine optical substrates from our Ilminster
facility with the coating capabilities that the Artemis business offers is
exciting. We were able to showcase Artemis on the G&H stand at this year's
DSEI trade show and there was significant customer interest in the integrated
offering that we are now able to offer. Our newly acquired GS Optics business
also provides us a new capability with which to access the market for low
weight optics for solider, body worn systems.
The resolution of some of the production constraints seen in the prior
financial year meant that our A&D revenues grew sharply by 26.2% during
FY2023, compared with the equivalent period last year, and by
22.0% on a constant currency basis. We achieved significant increases in
revenues of components and systems used in imaging systems in the defence
arena, including thermal imaging cameras from our
Keene, New Hampshire facility. Demand is currently strong for these systems
driven in part by the increasing need for new systems that have the capability
to counter UAVs.
Our Boston facility also moved in to full scale volume production for the
supply of their fibre optic modules used in a missile defence platform. Whilst
we continue to work on our production yields for these highly sensitive
modules, which remain below expected level, we were pleased with the
increasing levels of output and the fact that we were able to reduce our past
due backlog on these programmes.
Revenues from our deliveries of periscopes and sighting systems for armoured
vehicles increased marginally from the prior year but in FY2023 we started to
record revenues for our development and prototyping activities on the UK MoD's
Challenger 3 upgrade programme. This exciting new programme for us will
generate revenues for us for several years to come as the UK fleet is
progressively updated. The core technology that is being used will also form
the basis of a number of other programmes that we have either been awarded or
are in the process of bidding, most of which can be directly linked to the
current Ukraine conflict.
Whilst it still represents a small percentage of the Group's FY2023 revenues,
our engineering teams continue to be active in the field of laser based space
communications. Building upon work previously completed with our satellite
partners we are now developing more powerful laser amplifiers that will enable
transfer of greater volumes of data. We also continue to be active in working
on customer funded programmes that use the same technology fitted to very
high-altitude unmanned air vehicles. The area of laser based space
communications is a key element of our more focused and accelerated technology
development programme.
Our teams have continued to work on Directed Energy Systems with a number of
prime contractor customers. G&H's expertise in coating the large optics
that are positioned at the heart of these systems means that we are well
positioned to secure recurring production revenues once development activities
are complete.
In the commercial aerospace market we are seeing strong recovery in demand for
our components that are used in ring laser gyroscopes for guidance and
navigation purposes. Our Moorpark business that provides these components has
been asked by its principal customer to increase delivery volumes and the site
is busy recruiting to service that growing demand picture. We believe some of
that growing demand is as a result of our securing a greater share of the end
customer's allocation of their overall needs given the quality of the G&H
product.
Our growth in revenues in this market compared with the prior year helped to
reduce our adjusted operating loss for the segment from £2.7m in FY 2022 to
£2.3m in the current year. We recognise we have much work to do to restore
this business to the levels of profitability that are required. We are
investing additional, dedicated resources to improve our production yields in
our A&D businesses. We are also reviewing whether we have sufficiently
differentiated product offerings in all of the areas currently supplied by our
existing A&D business to justify continuing to supply.
Strategic priorities for FY2024
· We are investing to move up the value chain using combinations of
our components and technologies to demonstrate our capability to build systems
and sub systems. The addition of Artemis coating capabilities provides further
supports this strategy. Our customers are changing their business models and
are actively encouraging companies such as G&H to provide them the supply
of fully outsourced sub-assemblies and modules.
· We will exploit our latest technology in digital periscopes to
win new programme positions in a growing market. Our work on the UK's
Challenger programmes provides the underpinning technology that we can carry
forward into other programmes.
· We will continue to invest in our manufacturing processes and
engineering in order to meet the needs of our customers. We are exploring new
combinations of optical materials and thin film coatings to address the
market's developing needs.
· We will introduce a greater number of new products, including
products which look to fill a market need, in a managed and cost-effective
way, as well as take on projects with a high technical content initiated by
our customers. During FY2023 G&H introduced 42 new products and generated
£10.5m of revenue from new products that addressed the A&D market
including space satellite laser-based communication systems, new sighting
systems and IR lens assemblies for UAVs.
Life Sciences/Biophotonics
Revenue
£32.8m (FY2022: £29.7m)
Adjusted Operating Profit £4.1m (FY2022: £4.0m)
Adjusted Operating Margin 12.5% (FY2022: 13.3%)
Operating Profit £3.2m
(FY2022: £3.7m)
Percentage of Revenue 22.1% (FY2022: 23.8%)
Market Drivers
· Strong growth in laser enabled aesthetic procedures especially
from Asia, and in the West for tattoo removal.
· A growing middle class influenced by social media eager to access
laser enabled cosmetic and aesthetic procedures.
· A growing aging population generating demand for a shift towards
early diagnosis rather than later, more serious treatment of undetected
conditions.
· A trend towards more point of care and personalised medicine
driving demand for simple, volume diagnostic products.
· New applications for optical coherence technologies beyond the
traditional areas of eye examination and treatment.
· Greater use of cheap, disposable plastic optics in life science
instruments to avoid infection.
Our products enable
· Optical coherence tomography (OCT) primarily used in retinal
imaging for the diagnosis of glaucoma and macular degeneration, but also now
used in the detection of cardiovascular disease and cancer diagnostics.
· Laser surgery used in a wide range of applications including
prostate surgery, scar correction, cataract surgery, freckle, mole and tattoo
removal as well as wrinkle reduction and teeth whitening.
· Microscopy: Modern, laser-based techniques are revolutionising
the field of microscopy.
· Medical diagnostic instruments: G&H has a range of
capabilities including full product development, design, manufacturing,
certification and after sale service for the commercialisation of high-quality
medical diagnostic, in vitro diagnostic (IVD) devices, precision analytical,
electro-mechanical and laboratory instruments.
· Advanced polymer optics are playing an increasing part in medical
optics due to the cost and weight benefits as well as the need for disposable
systems to avoid infection.
Our strategy in action
We were pleased to be able to complete the acquisition of the GS Optics
business. This addition to the Group significantly increases our commercial
footprint in several high-growth areas within the large US life sciences
market including ophthalmic lenses, surgical imaging and diagnostic
instrumentation. It also adds the new capability of polymer optics to the
Group.
Immediately following the acquisition we have invested into the GS Optics site
in Rochester, NY state to establish our centre of excellence for Life Sciences
in North America. We will use the site to mirror many of the existing
capabilities we have in ITL Ashford, Kent for the UK and European medical
device market to offer ITL's solutions to the US Life Sciences market. We
are growing our medical instrument design and development team at the
Rochester location and are now able to offer our OEM Medical Device customers
significantly more capacity for production build in the US than was previously
the case.
The deployment of our improved operational processes also supported our
performance in to the Life Sciences market. Our Life Sciences revenue grew by
10.4% in the year to 30 September 2023, compared with the prior year. When
measured at constant currency this represents growth of 8.2%. Medical
diagnostic demand remained broadly flat compared with the levels seen in
FY2022 but one of our customers' important next generation instruments has
recently received final accreditation and will therefore move into full scale
production providing important underpin to FY2024 revenues.
Our ITL engineering team in Ashford continue to service a healthy order book
of new development work from which we expect future production volumes will be
secured. We have refreshed the management team at the site with proven
leadership skills recruited from large Life Science companies and they will
support the site in its next stage of growth and development.
Demand for our components used in specialist medical laser products achieved
mid-single digits growth. Demand was strong in the first half of the financial
year as we dealt with the very large order book, including some late
deliveries brought forward from the previous financial year. In the second
half we saw some tailing off of demand as some customers requested push outs
of scheduled deliveries whilst they corrected their own inventory holdings. We
remain watchful of the demand picture in this end market which is ultimately
driven by end consumer demand for cosmetic procedures.
Strategic priorities for FY2024
· We will complete the investments we are making in business
winning and engineering resources located in our North American Life Sciences
hub located on GS Optics hub in Rochester and secure a greater share of the
large North American medical diagnostic market.
· We will work with our OEM Life Sciences customers on the
development and accreditation of their next generation medical devices and
secure the follow-on production revenues from their instrument build.
· We will work on our crystal growth processes and look to
outsource a greater proportion of our component build for medical lasers to
deliver margin expansion from this product line.
· We will integrate our new polymer optics capabilities into the
overall product offering for our customers helping to drive the further growth
of our GS Optics business.
· We will continue to invest in R&D projects in close
collaboration with our customers, to develop the existing portfolio of
products and to ensure that they remain competitive. During FY2023 G&H
introduced 3 new products and generated £4.9m of revenue from products that
address its life Sciences/Biophotonics market, especially in the medical
instrumentation market.
Financial Review
Overview of the Year
We entered FY2023 with a record order book including a higher than normal
level of past due backlog. During the year we have made excellent progress in
delivering that order book and bringing our late backlog levels down thanks to
focused activities in the area of resourcing and supply chain management. The
result was growth in revenue of 17.3% excluding the effect of the two
acquisitions completed over the summer months and on a constant currency
basis. When the contribution from the two acquisitions is added revenues for
the year totalled £148.5m (2022: £124.8m). It was good to see significant
revenue progression being made in each of our three market areas.
Inflation was a net headwind to Group profitability in the first half of the
financial year but in the second half our pricing actions offset the cost base
inflation we experienced. After the difficulties we experienced in securing
on time, in full deliveries from our supply chain in FY2022 and the first few
months of FY2023 in the second half of the year the situation improved and at
the same time materials inflation started to abate.
The additional volumes helped to contribute to an increase in adjusted
operating profit to £11.3m (2022: £8.9m), despite the net headwind from
inflation in the first half of the financial year. We have also invested to
add further skilled resources in our engineering, supply chain and operations
teams to establish a strong foundation on which to support the further growth
of the Group. After the impact of adjusting items which included acquisition
and disposal costs and the cost of the Group's restructuring and site
consolidation activities, the full year statutory operating profit was £6.9m
(2022: a loss of £(1.6)m).
Adjusted EPS increased to 31.3 pence (2022: 27.2 pence) reflecting the Group's
improved adjusted operating profit in year. Basic earnings per share was a
profit of 16.1 pence (2022: a loss of (8.0) pence), with the improvement
attributable to both the improvement in adjusted operating profit as well as a
reduction in adjusting items compared to the prior year.
During the year we invested £11.7m cash in the acquisitions of GS Optics and
Artemis and a further £2.0m in working capital levels to support the Group's
growing order book and to mitigate the risks from some elements of our supply
chain. Our investment in additional inventory peaked at the end of the first
half and in the second half of the year we inflowed £3.7m from reductions in
our inventory holdings, reflecting our growing confidence in our supply chain
and our ability to hold lower levels of safety stocks in the business.
Cashflow from operating activities totalled £16.2m (2022: £6.1m). We ended
the year with net debt of £31.7m (2022: £19.1m) including IFRS 16 lease
liabilities of £10.8m (2022: £6.3m). Dividend payments totalled £3.2m (2022
- £3.1m). At 30 September 2023 leverage was 1.1x (2022: 0.7 times).
In the first half of the financial year, our order book returned to normalised
levels as our customers took advantage of our shortening lead times and, in
some cases, took steps to regularise their inventory holdings which had become
inflated. The result was that in the first six months of the financial year,
our book-to-bill ratio was 0.8x and the order book reduced to £124.4m at the
end of March 2023. During the second half of the financial year excluding the
two newly acquired businesses the Group's book-to-bill ratio stood at 1.04x
and the Group finished the year with an order book of £124.1m. This provides
a good level of underpin and visibility for FY2024 revenues.
Revenue
REVENUE
2023 2022
Year ended 30 September £'000 % £'000 %
Industrial 77,131 51.9% 64,553 51.7%
A&D 38,556 26.0% 30,553 24.5%
Life Sciences / Biophotonics 32,789 22.1% 29,696 23.8%
Group Revenue 148,476 100% 124,802 100.0%
Group revenue totalled £148.5m (2022: £124.8m) including a £2.2m
contribution from the two acquired businesses. Group revenue was 13.6% higher
than the prior year on an organic, constant currency basis. Revenue is the
second half grew 5% compared with the first half, again excluding the
contribution from the two acquired businesses and on a constant currency
basis. We saw growth in revenues across all three of our end markets with the
largest percentage increase coming from our A&D business where we migrated
a number of programmes into volume production and demand for our components
and camera systems for a range of imaging systems was strong. Revenues into
our A&D market grew by 20.4% on an organic, constant currency basis.
In our Industrial markets demand for our components that are used in
semiconductor production were strong while we also achieved growth into the
industrial laser and sensing market. Revenue grew in our Industrial markets by
13.7% on an organic constant currency basis. Finally in our Life Sciences
markets volumes for our medical diagnostic business were broadly flat compared
with the prior year but revenues in to the medical laser market were good
resulting in a 6.2% revenue growth for this section when measured on an
organic, constant currency basis.
Operating profit and margin
The Group's adjusted operating profit was £11.3m (2022: £8.9m) and statutory
profit was £6.8m (2022: loss of £1.6m) after a charge of £4.5m (2022:
£10.4m) for items excluded from adjusted operating profit. This included:
· Acquisition costs of £2.8m (2022: £1.9m) of which £1.7m (2022:
£1.9m) related to the non-cash amortisation charges on intangible assets
arising on the Group's historical and current year business combinations. The
remaining £1.1m related to costs incurred associated with the changes to the
Group's portfolio of businesses, most significantly the acquisitions of GS
Optics and Artemis.
· Restructuring costs of £0.8m (2022: £1.2m) associated with the
restructuring of the Group's operations and the costs incurred to establish
our contract manufacturing partner's capability to manufacture both
acousto-optic and fibre optic products.
· Site closure costs of £0.9m (2022: £nil). During the year the
Group closed its small facility in Shanghai and transferred its ITL business'
US operation from its site in Virginia into the GS Optics campus in Rochester.
The adjusted operating margin of 7.6% (2022: 7.1%) reflects the benefit of the
additional volumes as well as the first stages of our operational improvement
programme. The above margin improvement was achieved despite a net headwind to
profitability in the first half of the year from increases in input costs
outstripping our own price increases to customers. In the second half of the
year there was a balance achieved between increases in our input costs and our
pricing to customers. Whilst profitability in our Life Sciences and Industrial
businesses is approaching our medium term target of mid-teens returns our
A&D business remains loss making. We are investing further resources to
address poor production yields on some of our product ranges. We are also
assessing whether some of our current product offering should be discontinued
if we cannot formulate a clear path to acceptable returns.
A reconciliation between adjusted profit and statutory profit is shown below.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating profit / (loss) Net finance costs Profit / (loss) before tax Taxation Earnings / (losses) per share Operating cash flow
Year ended 30 September 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
£000 £000 £000 £000 £000 £000 £000 £000 pence pence £000 £000
Reported 6,850 (1,557) (1,830) (717) 5,020 (2,274) (972) 264 16.1p (8.0p) 16,164 6,084
Acquisition costs 1,156 - 57 - 1,213 - (83) - 4.3p - 1,116 -
Amortisation of acquired intangible assets 1,672 1,903 - - 1,672 1,903 (327) (412) 5.4p 6.0p - -
Impairment of goodwill and intangible assets - 6,726 - - - 6,726 - (288) - 25.7p - -
Restructuring and site closure 1,666 1,179 - - 1,666 1,179 (337) (235) 5.5p 3.8p 934 526
CEO succession - 613 - - - 613 - (87) - 2.0p - -
Deferred tax on goodwill - - - - - - - (695) - (2.8p) - -
Tax charge arising from restatement of UK Deferred tax at 25% - - - - - - - 127 - 0.5p - -
Adjusted 11,344 8,864 (1,773) (717) 9,571 8,147 (1,719) (1,326) 31.3p 27.2p 18,214 6,610
Finance costs
Net finance costs totalled £1.8m (2022: £0.7m) with the increase due to the
higher drawn debt levels and higher base rates. Included within these costs is
a charge of £0.3m (2022: £0.2m ) in respect of lease interest. A 1% increase
in the cost of the Group's bank borrowings would have resulted in an
annualised increase in interest expense of £225,000 (2022: £147,000).
Further details of the Group's debt facilities are set out below.
Taxation
The Group's overall tax charge was £1.0m (2022 credit of £0.3m) including a
£0.7m credit (2022: £1.6m) in respect of items excluded from adjusted
profit. The adjusted tax charge was £1.7m (2022: £1.3m) resulting in an
effective tax rate of 18.0% (2022: 16.3%). 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.
Earnings Per Share
Basic adjusted earnings per share increased to 31.3 pence (2022: 27.2 pence),
reflecting the improved adjusted profit in the period. Basic earnings per
share improved to 16.1 pence (2022: 8 pence loss). This improvement was
driven by the improvement in adjusted operating profit and the reduction in
adjusting items set out above.
Cash flow
Cash flow generated from operating activities was £16.2m (2022: 6.5m).
During the first half of the financial year the Group invested £3.5m in
additional working capital, principally in additional inventory to support
growing production volumes but also to protect our customers' delivery
schedules in the face of continuing inconsistency in on time delivery from
some parts of our supply chain. In the second half of the year, the Group was
able to reduce its investment by £1.5m thanks to better on time performance
from our suppliers and therefore our growing confidence that lower levels of
safety stocks were required.
Our net capital expenditure totalled £6.9m (2022: £8.6m). The spend included
further investment in our contract manufacturing partner's facility to equip
them for the build of hi-reliability fibre couplers in addition to the
acousto-optic devices already transferred to them. We also transferred our ITL
business on to the Group ERP system during the year.
Our cash investment in the acquisition of GS Optics and Artemis totalled
£11.7m, of which £8.6m was in respect of GS Optics and £3.1m in respect of
Artemis. To fund the investment $20m was converted from our uncommitted
accordion facility into our base revolving credit facility. Since that time
repayments of $5.5m have been made. In addition ordinary shares with a value
of £2.1m were issued to the sellers of the GS Optics business and of £2.4m
to the sellers of Artemis. Deferred and contingent consideration of up to
$2.1m is payable for the acquisition of GS Optics dependent upon its financial
performance in the 12 months ended 31 December 2023. Deferred and contingent
consideration of up to £2.2m is payable for the acquisition of Artemis
dependent upon its financial performance to 31 July 2025.
Dividend payments in the year totalled £3.2m (2022: £3.1m).
Funding and Liquidity
The Group's operations are funded through a combination of retained profits,
equity and borrowings. Borrowings are raised at Group-level from the Group's
banking partner and lent to the subsidiaries. At 30 September 2023, the Group
had drawn $34.6m from its Group debt facility leaving undrawn committed and
uncommitted facilities of $35.4m. The Group's borrowings are in the form of a
US$ denominated Revolving Credit Facility (RCF). The RCF matures in March
2027. A further summary of the Group's borrowings and maturities are set out
in note 23 of the Group Financial Statements.
The Group's leverage is expressed in terms of its net debt/adjusted EBITDA
ratio. Under the Group's credit facility, the figure for net debt used in this
ratio excludes IFRS 16 lease liabilities and other IFRS 16 impacts. The
Group's main financial covenants in its bank facilities states that net debt
must be below 2.5 times adjusted EBITDA, and adjusted EBITDA is required to
cover interest charges, excluding interest on pension schemes, by at least 4.5
times. At 30 September 2023 net debt/adjusted EBITDA was 1.1 times (30
September 2022: 0.7). Interest cover at 30 September 2023 was 9.0 times (30
September 2022: 24.6 times).
The Group maintains sufficient available committed borrowings to meet any
forecast funding requirements.
Dividend Policy
In determining the level of dividend, the Board considers not only the
adjusted earnings cover, but also looks to the future expected underlying
growth of the business and its capital and other investment requirements. The
Group's balance sheet position and its expected future cash generation are
also considered. The Board takes into consideration the Group's Principal
Risks, which are set out in our Annual Report. The Group's ability to pay a
dividend is impacted by the distributable reserves available in the parent
Company, which operates as a holding company, primarily deriving its net
income from dividends paid by its subsidiary companies. At 30 September 2023,
Gooch & Housego PLC had sufficient distributable reserves to pay dividends
for the foreseeable future.
Given the strength of the Group's order book and the growth potential of the
Group confirmed by our recent strategic review the Board is proposing a final
dividend of 8.2 pence per share (FY2022: 7.9p), giving a total of 13.0 pence
per share (FY2022: 12.6p) for the year when combined with the 4.8 pence per
share paid as an interim dividend in July 2023 (FY2022: 4.7p). The Board is
committed to growing the level of dividend cover.
Financial Risk Management
The Group's main financial risks relate to funding and liquidity, interest
rate fluctuations and currency exposures. The Group uses financial instruments
to manage financial risks arising from underlying business activities.
Foreign Currency
The Group is exposed to both translational and transactional currency risk. We
are able to partially mitigate the transaction risk through matching supply
currency with sales currencies but in our UK businesses we remain a net seller
of US dollars and Euros. We address these net sales through forward hedge
contracts seeking to cover at least 75% of the forecast net exposure over the
coming twelve months. These contracts are used to reduce volatility which
might affect the Group's cash balance and income statement.
The following are the average and closing rates of the foreign currencies that
have the most impact on the translation of the Group's Income Statement and
Balance Sheet into GBP.
2023 2022
Income Statement Average rate
USD/GBP 1.23 1.28
Euro/GBP 1.15 1.18
Balance Sheet Closing rate
USD/GBP 1.22 1.12
Euro/GBP 1.15 1.14
The Group's revenue is more sensitive to exchange rate movements than its
profit. A one cent change in the average Dollar exchange rate would have a
£0.7m effect on revenue but less than £0.1m effect on profit. The Group's
results are not significantly affected by movements in the Euro exchange rate.
Group Income Statement
For the year ended 30 September 2023
30 September 2023 30 September 2022
Note Underlying Non-underlying Total Underlying Non-underlying Total
(Note 4) (Note 4)
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 148,476 - 148,476 124,802 - 124,802
Cost of revenue (104,454) - (104,454) (85,741) - (85,741)
Gross profit 44,022 - 44,022 39,061 - 39,061
Research and development (9,274) - (9,274) (9,181) - (9,181)
Sales and marketing expenses (10,259) - (10,259) (8,697) - (8,697)
Administration expenses (13,980) (4,494) (18,474) (12,879) (3,695) (16,574)
Impairment of goodwill and acquired intangible assets - - - - (6,726) (6,726)
Other income 835 - 835 560 - 560
Operating profit / (loss) 2 11,344 (4,494) 6,850 8,864 (10,421) (1,557)
Finance income 11 - 11 - - -
Finance costs (1,784) (57) (1,841) (717) - (717)
Profit / (loss) before income 9,571 (4,551) 5,020 8,147 (10,421) (2,274)
tax (expense) / income
Income tax (expense) / income 3 (1,719) 747 (972) (1,326) 1,590 264
Profit / (loss) for the year 7,852 (3,804) 4,048 6,821 (8,831) (2,010)
Basic earnings / (losses) per share 5 31.3p (15.2p) 16.1p 27.2p (35.2p) (8.0p)
Diluted earnings / (losses) per share 5 31.0p (15.0p) 16.0p 27.0p (35.0p) (8.0p)
Group Statement of Comprehensive Income
For the year ended 30 September 2023
2023 2022
£000 £000
Profit / (loss) for the year 4,048 (2,010)
Other comprehensive income / (expense) - items that may be reclassified
subsequently to profit or loss
Gains / (losses) on cash flow hedges 1,287 (1,137)
Currency translation differences (5,801) 9,774
Other comprehensive (expense) / income for the year net of tax (4,514) 8,637
Total comprehensive (expense) / income for the year attributable to the (466) 6,627
shareholders of Gooch & Housego PLC
Group Balance Sheet
For the year ended 30 September 2023
2023 2022
£000 £000
Non-current assets
Property, plant and equipment 41,818 42,447
Right of use assets 9,932 5,063
Intangible assets 59,729 47,939
Deferred income tax assets 2,178 1,969
113,657 97,418
Current assets
Inventories 37,582 37,073
Trade and other receivables 34,075 35,598
Cash and cash equivalents 7,294 5,999
78,951 78,670
Current liabilities
Trade and other payables (21,156) (22,765)
Borrowings (10) (64)
Lease liabilities (1,443) (1,732)
Income tax liabilities (581) (578)
(23,190) (25,139)
Net current assets 55,761 53,531
Non-current liabilities
Borrowings (28,157) (18,730)
Lease liabilities (9,394) (4,539)
Provisions for other liabilities and charges (1,582) (848)
Deferred consideration (870) -
Deferred income tax liabilities (9,682) (8,291)
(49,685) (32,408)
119,119
Net assets 119,733 118,541
Shareholders' equity
Capital and reserves
attributable to equity shareholders
Called up share capital 5,159 5,008
Share premium account 16,051 16,000
Merger reserve 11,561 7,262
Cumulative translation reserve 10,027 15,828
Hedging reserve 15 (1,272)
Retained earnings 76,920 75,715
Total equity 119,733 118,541
Group Statement of Changes in Shareholders' Equity
For the year ended 30 September 2023
Note Called up share Share Merger Retained earnings Hedging Cumulative translation reserve £'000 Total
capital
premium
reserve
£000
account
£000 Reserve equity
£000
£000
£000 £000
At 1 October 2021 5,008 16,000 7,262 80,087 (135) 6,054 114,276
Loss for the financial year - - - (2,010) - - (2,010)
Other comprehensive expense / (income) for the year - - - - (1,137) 9,774 8,637
Total comprehensive (expense) / income for the year - - - (2,010) (1,137) 9,774 6,627
Dividends 6 - - - (3,105) - - (3,105)
Share-based payments - - - 743 - - 743
Total contributions by and distributions to owners of the parent recognised - - - (2,362) - - (2,362)
directly in equity
At 30 September 2022 5,008 16,000 7,262 75,715 (1,272) 15,828 118,541
At 1 October 2022 5,008 16,000 7,262 75,715 (1,272) 15,828 118,541
Profit for the financial year - - - 4,048 - - 4,048
Other comprehensive income / (expense) for the year - - - - 1,287 (5,801) (4,514)
Total comprehensive income / (expense) for the year - - - 4,048 1,287 (5,801) (466)
Dividends 6 - - - (3,180) - - (3,180)
Shares issued 151 51 4,299 - - - 4,501
Share-based payments - - - 337 - - 337
Total contributions by and distributions to owners of the parent recognised 151 51 4,299 (2,843) - - 1,658
directly in equity
At 30 September 2023 5,159 16,051 11,561 76,920 15 10,027 119,733
Group Cash Flow Statement
For the year ended 30 September 2023
2023 2022
Note £000 £000
Cash flows from operating activities
Cash generated from operations 7 16,164 6,084
Income tax repaid 2 456
Net cash generated from operating activities 16,166 6,540
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (11,697) -
Purchase of property, plant and equipment (6,257) (6,669)
Sale of property, plant and equipment 516 -
Purchase of intangible assets (1,062) (1,899)
Interest received 11 -
Net cash used in investing activities (18,489) (8,568)
Cash flows from financing activities
Drawdown of borrowings 19,154 6,300
Repayment of borrowings (8,378) (1,312)
Principal elements of lease payments (1,624) (1,584)
Interest paid (1,784) (717)
Dividends paid to ordinary shareholders (3,180) (3,105)
Net cash generated from / (used in) financing activities 4,188 (418)
Net increase / (decrease) in cash 1,865 (2,446)
Cash at beginning of the year 5,999 8,352
(570) 93
Exchange (losses) / gains on cash
Cash at the end of the year 7,294 5,999
Notes to the preliminary report
1. Basis of preparation
The Preliminary Report has been prepared under the historical cost convention
and in accordance with International Accounting Standards.
The Preliminary Report does not constitute statutory financial statements
within the meaning of section 434 of the Companies Act 2006.
Comparative figures in the Preliminary Report for the year ended 30 September
2022 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 2022, as described in
those financial statements.
2. Segmental analysis
The Group's segmental reporting reflects the information that management uses
within the business. The business is divided into three market sectors, being
Aerospace and 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, telecommunications
and scientific research. Further information can be found in our Operations
Review on pages 20-25.
Aerospace and Defence Life Sciences/Biophotonics Industrial Corporate Total
£000 £000 £000 £000 £000
For year ended 30 September 2023
Revenue
Total revenue 40,110 34,928 80,748 - 155,786
Inter and intra-division (1,554) (2,139) (3,617) - (7,310)
External revenue 38,556 32,789 77,131 - 148,476
Divisional expenses (38,889) (28,426) (64,224) 929 (130,610)
EBITDA¹ (333) 4,363 12,907 929 17,866
EBITDA % (0.9%) 13.3% 16.7% - 12.0%
Depreciation and amortisation (2,604) (1,205) (3,641) (1,894) (9,344)
Operating (loss) / profit before amortisation of acquired intangible assets (2,937) 3,158 9,266 (965) 8,522
Amortisation of acquired intangible assets - - - (1,672) (1,672)
Operating (loss) / profit (2,937) 3,158 9,266 (2,637) 6,850
Operating (loss) / profit margin % (7.6%) 9.6% 12.0% - 4.6%
Add back non-underlying items and amortisation of acquired intangibles 639 946 1,232 1,677 4,494
Adjusted operating (loss) / profit (2,298) 4,104 10,498 (960) 11,344
Adjusted (loss) / profit margin % (6.0%) 12.5% 13.6% - 7.6%
Finance costs (59) (65) (172) (1,534) (1,830)
(Loss) / Profit before income tax expense (2,996) 3,093 9,094 (4,171) 5,020
2. Segmental analysis (continued)
Aerospace and Defence Life Sciences/Biophotonics Industrial Corporate Total
£000 £000 £000 £000 £000
For year ended 30 September 2022
Revenue
Total revenue 32,992 33,190 69,316 - 135,498
Inter and intra-division (2,439) (3,494) (4,763) - (10,696)
External revenue 30,553 29,696 64,553 - 124,802
Divisional expenses (31,220) (24,640) (53,437) 107 (109,190)
EBITDA¹ (667) 5,056 11,116 107 15,612
EBITDA % (2.2%) 17.0% 17.2% - 12.5%
Depreciation and amortisation (2,745) (1,378) (3,803) (614) (8,540)
Operating (loss) / profit before amortisation of acquired intangible assets (3,412) 3,678 7,313 (507) 7,072
Amortisation and impairment of acquired intangible assets - - - (8,629) (8,629)
Operating (loss) / profit (3,412) 3,678 7,313 (9,136) (1,557)
Operating (loss) / profit margin % (11.2%) 12.4% 11.3% - (1.2%)
Add back non-underlying items and amortisation of acquired intangibles 746 273 1,093 8,309 10,421
Adjusted operating (loss) / profit (2,666) 3,951 8,406 (827) 8,864
Adjusted (loss) / profit margin % (8.7%) 13.3% 13.0% - 7.1%
Finance costs (113) (56) (130) (418) (717)
(Loss) / profit before income tax expense (3,525) 3,622 7,183 (9,554) (2,274)
¹EBITDA = Earnings before interest, tax, depreciation and amortisation
Management have added back the amortisation and impairment of acquired
intangibles and goodwill, restructuring costs, site closure costs and CEO
succession costs in the above analysis. This has been shown because the
Directors consider the analysis to be more meaningful excluding the impact of
these non-underlying expenses.
All of the amounts recorded are in respect of continuing operations.
2. Segmental analysis (continued)
Analysis of net assets by location:
2023 2023 2023 2022 2022 2022
Assets Liabilities Net Assets Assets Liabilities Net Assets
£000 £000 £000 £000 £000 £000
United Kingdom 83,746 (47,947) 35,799 72,870 (33,909) 38,961
USA 107,748 (24,323) 83,425 101,574 (23,472) 78,102
Continental Europe 198 (84) 114 488 (52) 436
Asia Pacific 916 (521) 395 1,156 (114) 1,042
192,608 (72,875) 119,733 176,088 (57,547) 118,541
For the year to 30 September 2023 non-current asset additions were £2.5m
(2022: £5.5m) for the UK and for the USA £6.5m (2022: £3.3m). There were no
additions to non-current assets in respect of Europe (2022: £nil) or the Asia
Pacific region (2022: £nil). The value of non-current assets in the USA was
£66.2m (2022: £56.4m) and in the United Kingdom £45.5m (2022: £41.5m).
There were no non-current assets in Europe or the Asia-Pacific region.
Analysis of revenue by destination:
2023 2022
£000 £000
United Kingdom 27,309 27,848
North America 59,328 47,267
Continental Europe 34,769 26,749
Asia Pacific and Other 27,070 22,938
Total revenue 148,476 124,802
3. Income tax expense
Analysis of tax charge / (credit) in the year
2023 2022
£000
£000
Current taxation
UK Corporation tax 843 399
Overseas tax 703 (3)
Adjustments in respect of prior years (1,130) (678)
Total current tax 416 (282)
Deferred tax
Origination and reversal of temporary differences (349) (422)
Adjustments in respect of prior years 874 313
Change to UK tax rate 31 127
Total deferred tax 556 18
Income tax expense / (income) per income statement 972 (264)
4. Non-underlying items
2023 2022
£000
£000
Included within administration expenses
Amortisation of acquired intangible assets 1,672 1,903
Acquisitions and disposals 1,156 -
Restructuring costs 787 1,179
Site closure costs 879 -
Impairment of goodwill and acquired intangible assets - 6,726
Other - 613
4,494 10,421
Included within finance costs
Unwind of discount on deferred consideration 57 -
57 -
Included within taxation
Tax effect of the non-underlying items above (747) (1,022)
Restatement of UK deferred tax balances at 25% - 127
Release of deferred tax on goodwill - (695)
(747) (1,590)
Acquisition costs of £1.2m (2022: £nil) related to costs incurred associated
with the changes to the Group's portfolio of business, most significantly the
acquisitions of GS Optics and Artemis.
Restructuring costs of £0.8m (2022:£1.2m) associated with the restructuring
of the Group's operating model and the costs incurred to establish our
contract manufacturing partners capability to manufacture both acousto-optic
and fibre optic products.
Site closure costs of £0.9m (2022: £nil). During the year the Group closed
its small facility in Shanghai and transferred its ITL business' US operation
from its site in Virginia into the GS Optics campus in Rochester.
Restructuring costs incurred in the year ended 30 September 2022 related to
the ongoing streamlining of our manufacturing operations and outsourcing
production of our commodity AO products to a contract manufacturer in
Thailand. The costs incurred in the period largely comprised staff costs,
severance costs, travel costs and asset write downs at the sites being closed.
Other non-underlying items in the year ended 30 September 2022 relate to costs
associated with the chief executive officer succession and principally
included payment in lieu of notice and accelerated IFRS 2 costs.
The UK corporation tax rate increased to 25% with effect from 1 April 2023.
During the year ended 30 September 2022, a charge of £0.1m was incurred in
relation to the tax rate differential between current and deferred tax on
timing differences arising in the year. The effect in the year ended 30
September 2023 was £31,000, which has been included in the underlying tax
charge.
5. 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 2023 is given below:
2023 2022
Number of shares used for basic earnings per share 25,085,805 25,040,919
Number of dilutive shares - impact of share options granted 272,361 211,603
Number of shares used for dilutive earnings per share 25,358,166 25,252,522
A reconciliation of the earnings used in the earnings per share calculation is
set out below:
2023 2022
£000 pence £000 pence
per share per share
Basic earnings / (losses) per share 4,048 16.1p (2,010) (8.0p)
Amortisation of acquired intangible assets (net of tax) 1,345 5.4p 1,491 6.0p
Acquisitions and disposals 1,073 4.1p - -
Site closure costs 729 2.9p - -
Impairment of goodwill and intangible assets (net of tax) - - 6,438 25.7p
Restructuring costs (net of tax) 599 2.6p 944 3.8p
Other non-underlying items (net of tax) - - 526 2.0p
Unwind of discount on deferred consideration 58 0.2p
Release of deferred tax on goodwill - - (695) (2.8p)
UK deferred tax rate change - - 127 0.5p
Total adjustments net of income tax expense 3,804 15.2p 8,831 35.2p
Adjusted basic earnings per share 7,852 31.3p 6,821 27.2p
Basic diluted earnings / (losses) earnings per share 4,048 16.0p (2,010) (8.0p)
Adjusted diluted earnings per share 7,852 31.0p 6,821 27.0p
Basic and diluted earnings / (losses) 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.
6. Dividends
2023 2022
£000
£000
Final 2022 dividend: 7.7p per share (Final 2021 dividend paid in 2022: 7.7p) 1,978 1,928
2023 Interim dividend of 4.8p per share (2022: 4.7p per share) 1,202 1,177
3,180 3,105
The Directors have proposed a final dividend of 8.2p per share making the
total dividend paid and proposed in respect of the 2023 financial year 13.0p.
(2022: 12.6p per share). The total value of the proposed final dividend is
£2,114,000 (2022: £1,978,000).
7. Cash generated from operating activities
Reconciliation of cash generated from operations
2023 2022
£000 £000
Profit / (loss) before income tax 5,020 (2,274)
Adjustments for:
- Amortisation of acquired intangible assets 1,672 1,903
- Amortisation of other intangible assets 1,692 1,438
- Impairment of intangible assets - 6,726
- Loss on disposal of property, plant and equipment 234 71
- Write back of lease creditor on early termination of lease - (96)
- Depreciation 7,652 7,102
- Share based payment charge 337 743
- Amounts claimed under the RDEC (200) (200)
- Finance income (11) -
- Finance costs 1,841 717
- Non cash interest charge included in finance costs (57)
Total 13,160 18,404
Changes in working capital
- Inventories (1,291) (5,557)
- Trade and other receivables 1,005 (5,707)
- Trade and other payables (1,730) 1,218
Total (2,016) (10,046)
Cash generated from operating activities 16,164 6,084
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FSEFULEDSESERecent news on Gooch & Housego
See all newsREG - Gooch & Housego PLC - Half Year Trading Update
AnnouncementREG - Gooch & Housego PLC - Divestment of EM4
AnnouncementREG - Gooch & Housego PLC - Director/PDMR Shareholding
AnnouncementREG - Gooch & Housego PLC - Notification of Major Holdings
AnnouncementREG - Gooch & Housego PLC - Notification of Major Holdings
Announcement