REG - Gooch & Housego PLC - Results for the year ended 30 September 2024
03/12/2024 07:00
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RNS Number : 5005O Gooch & Housego PLC 03 December 2024
For immediate release 3 December 2024
Gooch & Housego PLC
("Gooch & Housego", "G&H", the "Company" or the "Group")
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2024
Gooch & Housego PLC (AIM: GHH), the specialist manufacturer of photonic
components and systems, today announces its audited results for the year ended
30 September 2024.
Year ended / as at 30 September 2024 2023** Change
Revenue (£m) 136.0 135.0 +0.7%
Adjusted profit before tax (£m)* 8.1 10.3 (21.6%)
Adjusted basic earnings per share (pence)* 25.5p 33.9p (24.8%)
Statutory profit before tax (£m) 4.2 6.0 (29.9%)
(Loss) / profit for the year including discontinued operations (6.4) 4.0 (10.4)
Basic earnings per share (pence) 12.7p 19.4p (34.5%)
Basic earnings per share from continuing and discontinuing operations (pence) (24.7p) 16.1p (40.8p)
Total dividend per share (pence) 13.2p 13.0p +1.5%
Net debt excluding IFRS16 (£m) 16.0 20.9 (4.9)
Net debt (£m) 25.8 31.7 (5.9)
*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 restructuring costs,
together with the related tax impact. A reconciliation of adjusted figures to
reported figures is shown on page 19.
** Represented to exclude discontinued operations
Key points
· Strategy - good progress delivering the strategic changes that
will support mid-teen return on sales over the medium-term.
· Portfolio - divestment of the EM4 business in March 2024 and the
acquisition of Phoenix Optical in October 2024, both supporting the Group's
transformation journey. Loss from discontinued operations of £9.7m.
· Revenue - up 0.7% to £136.0m (FY2023: £135.0m) for the Group's
continuing operations; second half revenue was 15% higher than the first half
on an organic, constant currency ("OCC") basis.
· Profit - adjusted operating profit totalled £10.5m (FY2023:
£12.1m). Reported profit before tax at £4.2m (FY2023: £6.0m).
· Order book - order book closed at £104.5m (FY2023: £115.3m).
Strong order pipeline particularly for our A&D business.
· Debt - net debt fell to £25.8m (FY2023: £31.7m) of which bank
debt was £16.0m (FY2023: £20.9m). Group leverage remains comfortable at
0.9x.
· Dividend - Final dividend of 8.3p (FY2023: 8.2p) and full year
dividend of 13.2p (FY2023: 13.0p) reflecting the Board's confidence in the
growth potential of the Group.
· Outlook - Underpinned by our strategy which is making G&H a
better, more sustainable business we are confident that the Group will deliver
profitable growth in the coming financial year.
Charlie Peppiatt, Chief Executive Officer, commented:
"During FY2024 we made further positive progress in establishing strong
foundations to deliver our strategic priorities and enhance mindshare with our
customers many of whom are demonstrating a growing confidence in G&H.
Despite the challenges the Group experienced in the first half of FY2024 due
to reduced demand in our industrial and medical laser markets, G&H
delivered a strong performance in the second half of the year underpinned by
the solid demand for our Life Sciences and A&D products and also
reflecting the significant operational improvements that have been made across
the Group."
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 Burson 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 Burson
Buchanan, 107 Cheapside, London EC2V 6DN. To register attendance, please
contact 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://webcasting.buchanan.uk.com/broadcast/67236f05c86085b1bff5dc74
(https://webcasting.buchanan.uk.com/broadcast/67236f05c86085b1bff5dc74)
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/) .
2025 Expected Financial Calendar
Annual General Meeting 24 February 2025
Interim results announcement 3 June 2025
Financial year end 30 September 2025
Full year results announcement December 2025
Chairman's Statement
Group overview
I am pleased with the significant progress the Group is making to deliver our
strategy. Last year we acquired and successfully integrated the GS Optics and
Artemis businesses, and in FY2024 we completed the sale of our EM4 business in
Boston to Luminar Technologies. These actions help ensure that the Group can
offer our customers differentiated products and technologies, generate
synergies with other parts of the G&H Group and support the Group's
journey to mid-teens returns.
The year brought challenges of lower levels of activity and uncertainty in
some of the markets which we supply. Despite this there has been encouraging
take up of newly developed products generated from a more focused portfolio,
which continue to be recognised for their superior performance and
reliability. I was particularly pleased by the results of our FY2024 customer
survey which showed a significant improvement on previous surveys.
We have accelerated the transfer of our product lines to selected
manufacturing partners. I was particularly impressed by the transformation
during the year at our Torquay facility. The site has now transferred all its
hi- reliability fused fibre production to its supply partners and repurposed
production for the manufacture of more complex fibre optic modules where
demand is increasing. This is an excellent example of the margin accretive
changes that we are implementing across the Group and which will position
G&H well to profit from the sustained recovery we expect in our markets.
Continued investment
We have been disciplined in supporting the business with the focused
investments it needs to grow. We have added very capable new team members,
especially in our engineering, sales and business development teams. We have
implemented new fully integrated HR information systems across the Group to
allow managers to better support the learning and development of their team
members.
Shortly after the end of the year we acquired Phoenix Optical, the culmination
of several months of hard work by the Phoenix and G&H teams. The business,
which is a very well-regarded supplier of precision optics, is highly
complementary to the Group and I look forward to seeing it prosper under
G&H ownership. We welcome the Phoenix employees to the G&H Group.
A sustainable business
At G&H we are focused on making our business sustainable and supporting
the transition to a net zero carbon economy. In FY2024 we established a
separate Committee of the Board, the G&H Sustainability Committee, to
focus better the Group's activities in these areas. Our employees are pleased
to be playing their part in moving to a more sustainable and healthier world.
Our medical diagnostic products support the earlier diagnosis of disease and
illness and our sensing products are integral to the efficient generation of
clean, renewable energy. Within our own business we are committed to achieving
net zero for our Scope 1 and 2 emissions by 2035 and I am pleased to report
that we made further progress towards that target in the financial year.
It is important for us to support the communities in which we operate. Our
facilities provide high quality employment opportunities in the towns and
cities where we are located, and our teams often host visits from local
schools and colleges to foster excitement amongst their students to pursue
careers in photonic technologies and advanced engineering. G&H employees
are also active in supporting charities local to the sites in which they work.
Our people
The Board is committed to supporting inclusive, collaborative ways of working
at G&H. I am very pleased to see the progress that is being made to foster
a "one team" culture through regular all employee briefing sessions supported
by high quality published materials that share information with our people
about activities in other parts of the Group.
Meeting with our employees throughout the year I am always impressed by their
commitment to the business and the skill with which they conduct their
day-to-day operations. I would like to thank them all for their contribution.
The progress that we have made in the year would not have been possible
without their continued hard work and support.
The Board
Having served on the Board since 2015, and consistent with the succession plan
previously announced, Brian Phillipson stepped down as the Senior Independent
Director and Chair of the Remuneration Committee on 30 September 2024. On
behalf of the Board, I would like to express our thanks for his considerable
contribution to G&H. Louise Evans succeeds Brian as Senior Independent
Director and Susan Searle takes on the position of Chair of the Remuneration
Committee.
The Board is committed to ensuring it operates in an efficient and effective
manner. To that end it has commissioned an independent consultant to conduct a
Board review and we look forward to implementing any recommendations that
result from the review.
We take our governance responsibilities very seriously and I am pleased to see
us engaging with several new agencies such as CDP and EcoVadis, in addition to
MSCI, to provide our stakeholders with independent validation of the processes
and controls that we have put in place.
Dividend
Given the Group's progress on delivering its strategy and the long-term
positive outlook for the business, the Board is proposing a final dividend of
8.3 pence per share for approval at the Company's Annual General Meeting on 24
February 2025, representing a total dividend for the year of 13.2 pence.
Payment of the dividend will be made on 28 February 2025, to shareholders on
the register as at 24 January 2025.
Outlook
The strategy that was put in place in FY2023 is working and supports the path
to mid-teens returns over the medium-term as customer ordering patterns start
to recover. We are positioned in attractive markets and aligned to long-term
growth trends. We are seeing strong demand from our A&D market and whilst
the recovery in some of our Industrial and Life Sciences markets is taking
longer than we had originally anticipated we expect to see sustained recovery
in demand in the second half of FY2025. Underpinned by our strategy which is
making G&H a better, more sustainable business we are confident that the
Group will deliver profit growth in the current financial year.
Gary Bullard
Chairman
3 December 2024
Chief Executive Officer's Statement
Introduction
G&H delivered a strong performance in the second half of the year
underpinned by solid demand for our Life Sciences and A&D products and
also reflecting the significant operational improvements that were made across
the Group following a challenging first half due to reduced demand in our
industrial and medical laser markets.
The growth in revenue in the second half and the continued strong order intake
reflect multi-year programme wins and the positive structural trends evident
in many of our end markets, albeit with the recovery of the semiconductor
market still not evident and now expected in the second half of FY2025. This
has been complemented by a number of new customer wins and incremental
business opportunities with existing customers. Our teams across the Group
have executed exceptionally well in a challenging environment, given the
significant supply chain and cost headwinds, to deliver a robust trading
performance in the second half of the year in line with expectations that
supports improved profit growth in FY2025. Having now completed my second full
year with G&H, I am pleased with the continued foundational progress that
has been made across the business through the collective hard work of the
workforce which is now being harnessed more effectively through a more focused
and fully deployed strategy to deliver sustainable margin growth for the
Group.
A significant cornerstone of our strategy is for the Group to become a more
customer focused business and to deliver an exceptional customer experience
when doing business with G&H. I am pleased to see how this is being
embraced across the whole Company and the progress that is being made through
disciplined focus on internal and external customer delight. Following our
2024 Customer Satisfaction Survey, it was encouraging to see the improvements
in all the key metrics that resulted in an increased Net Promoter Score for
G&H up to 42 from the previous score of 10 in 2023, demonstrating that our
customers are already starting to recognise the changes we have made and
continue to make with this key strategic priority for the Company.
I am proud that G&H's products and technology 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 FY2024 we achieved a 14.3% reduction in our
emissions intensity measure as we work towards our goal of being net neutral
on our Scope 1 and 2 emissions by 2035.
Business Performance
After the disappointing performance reported in the first half, the Group
delivered strong trading momentum during the second half of the year with
revenue up 15% enabled by the focused operational improvements and capability
investment made over the last year (FY2023: 5% increase). For the full
financial year 2024, G&H achieved revenue from continuing operations of
£136.0m which was broadly flat on the previous year (FY2023: £135.0m), or on
an organic, constant currency basis with the full year benefits of Artemis and
GS Optics excluded, revenues were down 3.0%. Adjusted profit before tax from
continuing operations was £8.1m, a reduction of 21.6% over last year (FY2023:
£10.3m).
During FY2024 we saw continued solid levels of customer demand albeit at more
normalised levels resulting in the order book stabilising at £104.5m at year
end (FY2023: £115.3m after adjusting for the divestment of the EM4 business).
On an organic constant currency basis, the order book declined by 5% during
FY2024, partially due to a further £1.4m reduction in the Group's past due
backlog and from the timing of orders for our medical diagnostic instruments.
Our order book for medical laser devices has also declined but we are now
starting to see evidence of some recovery from this market. In our industrial
markets, whilst the destocking patterns we saw in the first half of the year
now appear to be behind us, we have not yet seen sustained recovery in the
industrial laser market. Offsetting these declines our A&D order book has
grown strongly in the financial year thanks to increased demand from both our
commercial and defence customers assisted by the enhanced value proposition we
are able to offer. Our teams in the UK and US are focused on converting a
healthy pipeline of new A&D prospects and there has been further extension
of the order book following the year end.
Strategy
G&H is a business with outstanding products, enormous technical capability
and highly talented people and following the launch of our new strategy in the
summer of 2023 we are now starting to see the foundational benefits from
greater focus on operational execution, customer experience, employee
engagement and better prioritisation of our R&D technology and investment.
Our new strategy continues to refocus the whole business on delivering
sustainable margin growth and transforming G&H to become an 'innovative
customer focused technology company' delivered responsibly by making a 'better
world with photonics'. We are making good progress to ensure that G&H
becomes and remains the 'first choice' for all our stakeholders including our
employees, our customers, our shareholders, our eco-system partners or the
communities where we operate. We are offering a more 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 and Portfolio
The Group's new strategy has identified a path to mid-teen returns over the
medium term that includes benefits from our 'portfolio' activities achieved
through addressing non-performers in combination with pursuing 'speed to
value' acquisitions. Following the two strategic acquisitions of GS Optics and
Artemis Optical in the summer of 2023, we have made good progress with the
integration of both of these businesses into the Group. These two 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
into Aerospace & Defence markets with Artemis in Plymouth UK and into the
North American Life Sciences market through GS Optics in Rochester NY. We
invested in both businesses during the year to establish enhanced capabilities
at both facilities, most notably with the addition of a further coating
chamber in Plymouth and the establishment of a new Life Sciences R&D hub
and medical IVD device ISO13485 certified manufacturing centre in Rochester.
Both acquisitions are proving to be an excellent fit in terms of our
commitment to precision, innovation and customer focus, supporting the
delivery of the Group's strategy.
Aligned to our strategy to review our portfolio to address non-performing or
non-core parts of the Group, we concluded that the majority of products
supplied by our EM4 facility in Boston were not sufficiently differentiated to
generate the level of returns needed to support the Group's journey to
mid-teens returns. In March 2024 G&H announced the divestment of EM4 to
Luminar Technologies as the result of the carefully considered and ongoing
review of our A&D product portfolio. This disposal supported the Group's
consolidation of our A&D activities into areas where we can offer
differentiated products to our customers and enable the Group to grow our
optical systems business and maximise value creation from accretive optical
systems solutions. At the same time prior to the sale, G&H successfully
transferred out of EM4 to other G&H facilities technology for fibre fusing
which is differentiated and is employed in the modules we supply into advanced
photolithography equipment and some medical device applications.
Our Markets
Industrial revenues in FY2024 at £67.9m declined by 9.1% from the prior year
due to the continued slowdown of the semiconductor market and protracted
destocking in our Industrial markets. Despite these challenges in the year,
volumes of our fibre optic modules and assemblies used in both next generation
advanced lithography systems and subsea data networks remained robust with
growth in the second half as new programmes started to migrate to volume
production and demand picked up our long-standing hi-reliability fibre
couplers. Revenue from our industrial laser customers were weaker than the
prior year remaining broadly flat through FY2024 and whilst some early signs
of a pick-up in demand were evident towards the end of the year, we continue
to watch developments closely and work with our key partners in this space to
assess changes to demand visibility. Any sustained recovery from our broader
industrial laser and semiconductor markets is now not expected until the
second half of the coming calendar year.
A&D revenue growth in the year was 26.0% and on an organic constant
currency basis grew by 10.3% compared with the prior year. Volumes in our
Aerospace & Defence markets grew significantly as a result of improved
productive capacity at several of our sites and as a number of new projects
move into production phase, along with the early commercial synergy benefits
of the Artemis Optical acquisition starting to be realised especially around
advance laser protection capabilities that we can now offer alongside our
superior optical systems products. 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 FY2024 where the conflict in Ukraine is
fuelling increased demand and greater urgency of supply. This was particular
evident from the second half revenue growth from deliveries of precision
optics and advanced sighting systems into both air and land military platform
programmes. In the commercial aerospace market demand for our ring laser gyro
components was strong and the Group is now benefiting from the additional
capacity we have added to meet this increased demand.
The Life Sciences business performed well overall with revenues up 1.3% on a
constant currency basis and we saw continued growth in demand for our medical
diagnostic products. For example, 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 platform in FY2025 and beyond. Our Life
Sciences R&D team remained fully engaged in supporting customers with the
design and regulatory accreditations of their next generation instruments
which are expected to convert to production revenue for the Group in the
coming years. We have also received positive and encouraging levels of
customer interest and initial orders for our new North American Life Sciences
Centre of Excellence in Rochester NY which was established during the year and
has already received ISO13484 certification for the manufacture of medical
devices. We expect this facility to be a key part of our growth strategy for
our Life Sciences business in the future. However, the other part of our Life
Sciences business focused on the design and manufacture of products into the
medical laser market had a challenging year. Despite some recovery in demand
in the second half, we continued to see a significant slowdown in the demand
for our medical lasers mainly due to extended destocking from some of our
customers as well as the impact of competition in certain product segments
from lower cost Chinese products.
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 a significant portion of our
hi-reliability fibre coupler business to that same partner. During FY2024 we
were able to accelerate the preparations for the transfer of further fibre
optics and other products, where technological sovereignty is not a
differentiator, building upon a proven model that has now been established
with our selected contract manufacturing partners.
We have continued to invest in our technology roadmaps albeit with a greater
focus following the recent strategic review and our R&D teams are working
closely with many of our customers on the accelerated development of their
next generation products. Total investment on product development activities
increased to £7.8 million in FY2024 (FY2023: £7.4m). During the year, the
Group reduced net capital expenditure to £5.2 million compared with £7.3
million in the previous year aligned to our strategic objectives. Notable
spend in the period was focused on the integration of the new acquisitions,
Artemis and GS Optics and establishing our Life Sciences innovation hub and
centre of excellence in Rochester NY. Carefully selected capital investment
was also made in our optical systems and precision optics business to address
bottlenecks and meet increased customer demand alongside the operational
efficiency activities underway at these sites.
The Group retained high levels of inventory during FY2024 that are still above
pre-pandemic levels, however, through greater focus and improved supply chain
and inventory management disciplines being implemented across the Company
there was a pleasing reduction during the period and this trend is expected to
continue into FY2025.
This combined with strong collections of receivables and the funds from the
sale of the EM4 business resulted in net debt excluding lease liabilities
reducing to £16.0m from £20.9m. Our leverage as measured for our banking
covenant stands at 0.9x (2023 1.1x), which along with available committed and
uncommitted bank facilities of $39.6 million 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 FY2024 we introduced 48 new products (FY2023: 57) and delivered £25.3
million of revenue (FY2023: £26.1 million) from new products. Following our
strategic review, we continue to refocus and prioritise our global R&D
efforts and investment behind the following seven vital few areas:
1. Expansion of AO technologies into Semiconductor market and EUV
eco-system.
2. New medical laser technologies and applications focused on moving
up value chain from component to sub assembly and full systems.
3. Advanced fibre optics technology and systems supporting submarine
networks.
4. Imaging and sighting systems, especially focused on the A&D
market, for periscopes, sights and other optical sub-systems.
5. Precision optics added value and advanced coatings and laser
protection filtering capabilities.
6. Moving up the value chain in Fibre-Optics with a focus on sensing,
modules, LiDAR.
7. Medical diagnostics and bio-photonics IVD solutions with strategic
focus on expanding our offering into the US Life Sciences market.
During FY2024 technology roadmaps have been developed to refocus R&D
activities around these seven 'vital few' areas for the Group to drive 'value
creation'. There has been investment to strengthen acoustic-optic engineering
and product line team with the appointment of additional technical and product
development capability. In the Fibre optics business unit we saw strong
progress with the customer-led development of next generation systems for semi
fab, submarine network and medical diagnostics. The precision optics and
optical systems technology teams have been enhanced by the advanced coatings
engineering team that joined with the acquisitions of Artemis and disciplined
refocus of our highly talented engineering team in St Asaph is already
delivering better outcomes. The successful launch of our new US Centre of
Excellence in Rochester NY long with the new engineering talent that has
joined the Group in this team during FY2024 is promising for the future. These
R&D projects are expected to contribute more than £50m of incremental
margin accretive revenue over the plan period.
Corporate Responsibility and Sustainability
The Board is accountable to its shareholders and is committed to the highest
standards of corporate governance. To this end the Group has adopted the UK
Corporate Governance Code (2018). In order to ensure the Group 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. Susan Searle, who joined the Board in FY2023 with a
wealth of experience in many of the markets in which we operate and
particularly sustainability matters, has Chaired the newly introduced
Sustainability Committee which is already providing greater clarity and
alignment to our activities in this area.
G&H is committed to creating a safe, engaging, diverse and inclusive place
to work for the Group'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 Group 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. 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 19.2%, another major
step forward in achieving our target of being net neutral on this measure by
2035. It was particularly encouraging to see our facility in Torquay become
the first Scope 1 and 2 net neutral zero site across the Group, leading the
way for other to follow in the future. We were also pleased to see a further
two sites, Ashford and Keene (FY2024) join Ilminster, Torquay (FY2023) and
Fremont sites with certification to the environmental ISO14001 standard. This
now means that 50% of the Group's global footprint is covered by this
environmental accreditation and 70% of our employees. This was a core
commitment when we launched our new strategy in FY2023 and we are making good
progress to achieve the deployed 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
During FY2024 the Group has made further positive progress in establishing
strong foundations to deliver our strategic priorities and enhance mindshare
with our customers many of whom are demonstrating a growing confidence in
G&H. Despite the challenges the Group faced during the year through the
reduced demand in our industrial and medical laser markets persisting longer
than expected which resulted in a material impact to trading in the first
half, G&H is well positioned to benefit from recovering demand levels in
these markets now expected in the second half of 2025. In the second half, we
delivered the expected top line growth for the Group through the improvements
in operational execution and a solid order book, which reflected a significant
number of new customer wins, incremental business opportunities with existing
customers and continuing market share gains. Our teams across the Group have
performed exceptionally well in a year characterised by further significant
change, ongoing supply chain issues, destocking and continued cost
inflation. I would like to extend my thanks to all our employees for their
hard work and highlight the positive way the whole organisation has embraced
the transformational changes underway across the Company.
G&H is well-aligned with the prevailing global mega trends, many
underpinned by the next frontier of photonics, which is driving demand from
high-growth markets. The current surge in demand in the A&D markets is
expected to last for a number of years and G&H is positioned particularly
well with our existing capabilities and the addition of enhancing technology
in this area through recent acquisitions.
Whilst we do not expect to see our industrial laser and semiconductor markets
return to growth until next year, we are seeing strong demand for our advanced
optical systems capabilities from the defence sector and there are significant
new business opportunities that we are working hard to secure. G&H
continues to make progress on delivering the self-help, technology and
portfolio activities that underpin our strategic plan. We saw further
improvement with on time delivery performance in FY2024 and customer feedback
is now trending in a positive direction. The Group is now better positioned to
benefit from the anticipated recovery in our end markets next year thanks to
the disciplined implementation of our strategy. This has been further
underlined by the recent successful acquisition of Phoenix Optical at the
beginning of the new financial year in October. Phoenix is an excellent fit
within G&H and the initial feedback from our combined customers has been
particularly encouraging.
Despite this positive overall outlook for the Group, we remain cautious about
some supply chain and commercial headwinds in the near term. The labour
markets for talent in both the UK and US remain competitive leading to some
supply side challenges that continue to frustrate the recruitment of the
required talent, especially in engineering and technical positions. Global
supply chain constraints, although better than in the recent past, continue
along with an inflationary environment for wages, raw materials and energy all
require diligent attention and agility. Whilst price increases have been
passed onto customers in FY2024 to address most of these cost increases, cost
inflation continues to impact the business and the ability to fully offset all
cost base inflation through pricing actions is becoming more difficult in
certain areas.
While mindful of the persistent macroeconomic and geopolitical uncertainties
that exist, 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, A&D markets
underpinning the future growth potential of the Group. I am confident we will
build on the foundational progress made over the last year, supported and
clearly directed from G&H's fully deployed strategy, to become a more
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
3 December 2024
Operations Review
Industrial
Revenue £67.9m
(FY2023: £74.7m)
Adjusted Operating Profit £7.8m (FY2023: £10.6m)
Adjusted Operating Margin 11.5% (FY2023: 14.2%)
Operating Profit £7.2m (FY2023:
£9.4m)
Percentage of Group Revenue 50.0% (FY2023: 55.3%)
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 extreme ultra violet (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
During the year we continued to deliver on our strategic objective of
transferring more of our stable production to our low cost region contract
manufacturing partner. Building upon the transfer of some of our acousto-optic
products during FY2024, we supported our partner to increase the volume of
hi-reliability fused couplers they make for us. This included securing
important customer qualification of their facility for the manufacture of
these very sophisticated devices. We supported their ramp up by transferring
further production rigs that are used for the manufacturing process to them.
As a result all of the Group's traditional hi-reliability fibre couplers are
now built by our two contract manufacturing partners as we have migrated our
own in-house production teams on to the build of more complex fibre optic
sub-assemblies and modules. This represents a significant pivot for the
production team in our Torquay facility, but one they have embraced with
significant skill and dedication.
Our products used in the manufacture of the most advanced micro chips using
EUV projection are now in steady state production. This represents a
considerable success of converting one element of our technology roadmap in to
a strong and recurring revenue stream.
Another example of this was our development of an advanced fibre optic
amplifier module used in an important new subsea data cable network. During
FY2024 we secured the customer's contract, completed our design activities and
achieved the deliveries of production units to our customer. This is another
pleasing example of us using our technology roadmap to move up this specific
value chain from providing this market with hi-reliability fused couplers
integrated by others in to higher level assemblies in to bringing that
activity in to G&H helping with
the growth of both the Group's revenue and profitability.
Our fibre optic technology is also used to support the growth of the world's
renewable energy generation market. In this sub market we were pleased to see
another product from our technology roadmap migrate in to production. We are
providing a complex fibre optic assembly that is integrated with energy
generating wind turbines to assist with their safe operation and efficient
generation of energy.
Despite this pleasing progress on the delivery of our strategic objectives we
were impacted by the general industrial market slow down, especially in the
first half of the financial year when a number of our customers found
themselves in an overstocked position and reduced their orders in order to
correct their inventory holdings. Volumes recovered to some extent in the
second half but nevertheless our revenue in this segment declined by 9.7% on
an organic, constant currency basis.
Our revenue into both the Industrial laser and more established areas of the
semiconductor manufacturing environments both declined sharply. Our growing
deliveries into the more advanced semiconductor manufacturing systems which
increased by around 50% were not enough to offset these other sub market
declines.
Deliveries of our sensing products also declined. Revenue in this sub-market
is prone to fluctuation in our end customers' infrastructure build out
programmes and FY2024 was a disappointing year in this regard.
Subsea data market revenues grew well driven by additional demand from one of
our large, long-standing customers in the subsea data cable laying market.
This was thanks to additional end market demand but it was also pleasing to be
able to generate first revenue from a new customer we have secured for whom we
are providing an advanced amplifier unit that is incorporated into their
subsea data cable network.
Strategic priorities for FY2025
· We are adding further resources to our development teams focused on
our acousto- and electro- optic products which form the majority of our
product offerings into the Industrial market. We have good connections with
our customers' development teams and expect this close working to result in
the Group securing new programme positions on our customers' next generation
industrial laser and semiconductor manufacturing equipment.
· We will bring new products to the market and ensure that we remain at
the cutting edge of technology in this growing market. During FY2024 G&H
introduced 23 new products in Industrials generating £11.7m of revenue.
· We have identified further products that we will transfer to our
low-cost contract manufacturing partners 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. In some cases we have
also identified the opportunity for margin expansion from substituting some of
our existing supplier for our low cost region contract manufacturing partners.
· We will focus on niche markets where the quality and reliability of
G&H's product differentiate us from the competition in particular those
that require reliable performance in harsh and demanding environments.
· Through both cross sharing of experiences between our sites and
focused kaizen events our operations team will focus on improving the
efficiency of our factories, increasing our production yields, eliminating
waste and further rationalising our inventory holdings.
Aerospace & Defence
Revenue
£34.5m (FY2023: £27.3m)
Adjusted Operating Loss £(1.2)m
(FY2023: £(1.8m))
Adjusted Operating Margin (3.5%)
(FY2023: (6.8%))
Operating Loss
£(1.5)m (FY2023 £(2.3m))
Percentage of Group Revenue 25.3% (FY2023: 20.2%)
Market Drivers
· Global conflicts are driving 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
During FY2024 we made good progress on the development of the advanced
periscope systems that we will deliver into the UK Army's Challenger 3 MBT
upgrade programme. We shipped first prototypes to the prime contractor and our
systems were integrated in to the vehicle for successful live firing trials.
We expect to complete development activities in the first half of the coming
financial year.
The same core technology is being used for a periscope system that we are
providing to an eastern European NATO country for a new amphibious armoured
vehicle programme. We will commence delivery of production units in the coming
few months. We expect to secure further orders from this programme as the end
customers places orders for the full programme quantities.
The thin film coating capability that our Artemis business, which we acquired
last year, provides is able to offer protection against the harshest threats
from lasers as they are now being deployed on the modern battlefield. This has
led to Artemis being invited to tender for the emerging requirements of
western militaries, and in turn Artemis are able to cross sell other precision
optic products and capabilities from other G&H sites.
One of the priorities set out in our refreshed strategy was to review our
portfolio of products and to assess whether they were all sufficiently
differentiated to allow us to command acceptable returns for the Group. In the
first half of the year we concluded that the majority of the products offered
by our EM4 business in Boston did not meet that threshold and it was,
therefore, decided that we would divest the business. That divestment was
completed in March 2024. Before completing the sale we transferred a fibre
fusing technology from that business and moved it to our Torquay facility as
it is deployed in some of the products we supply in to the world's most
advanced photolithography machines and its retention was therefore very
important for the Group. Shortly before its sale, the EM4 business saw some of
its contracts cancelled by the end customer further supporting our decision to
divest the business.
Our revenues in our A&D segment grew by 10.3% on an organic constant
currency basis. Demand for our super polished optical components used in ring
laser gyroscopes is very strong and due to the investments we have made in our
team at Moorpark where those components are manufactured revenue grew.
However, our progress on improving our production yields was slower than
planned. Our precision optics are prone to damage as they complete the
production process and with a large number of new, less experienced operators
joining our team costs associated with poor quality increased. Reversing this
trend will be a priority for us for the new financial year.
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. Our work in this area is an important
element of our more focused and accelerated technology development programme.
We believe we are well positioned to benefit as the laser-based space
communication develops more fully.
We are also contracted by a number of prime contractors on Directed Energy
Systems. 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 revenue once these programmes transition to volume production. There
is a clear trend towards greater reliance by western militaries upon directed
energy systems within their overall suite of defensive capabilities.
Strategic priorities for FY2025
· We will complete the development of our advanced periscope
systems for the Challenger upgrade programme and exploit the core technologies
that we have developed to address their customers' needs.
· We will use the access that Artemis' unique thin film coating
capability gives us to leverage the sale of precision optic products and
capabilities from across the G&H Group.
· We will implement targeted improvement programmes to address
the poor yields and high scrap costs that we have experiences in some of our
sites supplying the A&D segment in FY2024.
· We will introduce a greater number of new products,
especially those with a high technical content. During FY2024 G&H
introduced 19 new products and generated £6.6m 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.
· We will use our expanding operational footprint arising from
our acquisition of the Phoenix business to optimise the location of
manufactures of our growing order book in the A&D segment.
· We will work on the swift integration of the Phoenix business
with the rest of the G&H Group to enable us to deploy the resources of the
G&H Group to sell the business' products worldwide.
Life Sciences
Revenue
£33.6m (FY2023: £33.0m)
Adjusted Operating Profit £4.6m (FY2023: £4.3m)
Adjusted Operating Margin 13.8% (FY2023: 13.1%)
Operating Profit
£3.9m (FY2023: £3.3m)
Percentage of Group Revenue 24.7% (FY2023: 24.4%)
Market Drivers
· 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.
· Growing demand for 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
· 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
· 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.
· 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.
Our strategy in action
Following the acquisition of the GS Optics in June 2023, we have worked
quickly to convert space in their Rochester facility into a Life Sciences
design and production centre replicating the capabilities that we have at our
Ashford site in this North American centre of excellence. We have achieved ISO
13485 accreditation for the new facility and secured our first R&D
contract for the team there. This represents an important step in our strategy
to access the very large North American medical diagnostic market with US
based resources.
The integration of GS Optics into G&H is now complete and our business
development teams are implementing targeted campaigns to offer GS Optics'
polymer capabilities to the Group's existing Life Sciences customers to
address their needs for disposable healthcare optics and other components
providing a one stop shop solution for their diagnostic device requirements.
These cross-selling campaigns are expected to support GS Optics' growth in
FY2025.
Our ITL business in Ashford is working with customers on the development and
accreditation of their next generation medical instruments. Wherever these
developments require optical components, the ITL business is able to cross
sell products and capabilities from other parts of the G&H Group ensuring
we capture a larger share of our customers' total spend.
Due to improvements made in our operations and supply chain processes at our
Ashford site we were able to respond quickly to growing demand from some of
our customers for additional volumes driven in turn by the success of their
product launches with their end customers. Despite growing volumes, the site
was able to reduce its inventory holding given greater confidence in our
supply to delivery on time and our deployment of improved forecasting and
material planning tools and processes at the site.
Working with our customers, we have identified some opportunities for the
outsourcing of certain components and modules that form part of those medical
diagnostic instruments to our low-cost region suppliers. Initial samples have
been received and in the coming year we will progress these transfers to
access the opportunities for margin accretion and additional surge capacity
that these transfers offer, working closely with our clients through this
process.
In our medical laser market, confronted by growing competition in the area of
less complex medical laser components we are assessing our options for
reducing our cost of manufacturing potentially using our low cost region
suppliers as well as assessing in which parts of our current portfolio we can
continue to offer differentiated products.
Our Life Sciences revenue grew by 1.3% on an organic constant currency basis
in the year to 30 September 2024, compared with the prior year. Demand for our
medical diagnostic instruments grew strongly offsetting the decline we saw
from our medical lasers markets which was significant especially in the first
half of the year and the medical laser OEM corrected their inflated inventory
holding. We started to see this position recover in the fourth quarter.
Strategic priorities for FY2025
· We will complete the resourcing of our expanded sales and business
development team focused on securing new business for our Life Sciences
business, with a specific focus on production orders for our North American
Life Sciences centre of excellence.
· This team will also focus on opportunities to cross sell GS Optics
polymer optics in to our existing Life Sciences customer base.
· We will complete the transfer of production of some of the components
and modules used in our medical diagnostic instrument to our low cost region
supply chain to support margin accretion and a surge build capability.
· We will work with our OEM Life Sciences customers to finalise the
development and accreditation of their next generation medical devices and
secure the follow-on production revenue from their instrument build.
· We will complete our assessment of our product range currently
supplying the medical laser market in the face of growing low cost Asian
competition.
· We will continue to invest in R&D projects in close collaboration
with our customers. During FY2024 G&H introduced 6 new products and
generated £7.0m of revenue from products that address its life Sciences
market, especially in the medical instrumentation market.
Financial Review
Overview of the Year
FY2024 saw us complete some important steps on the Group's strategy against
the backdrop of a difficult market environment. In the second half of FY2023
it had already been evident that some of our larger customers in the
industrial and medical laser markets were over-stocked and that volumes in our
first half of FY2024 would be impacted as they sought to correct their
inventory holding. That was the case and in the first half our revenue
declined by 5.3% on an organic, constant currency basis. In the second half
revenue recovered and was 15% higher than the first half on the same measure
although in the industrial and medical laser markets we are yet to see
sustained recovery in demand levels. Despite the second half recovery revenue
for the full year finished 0.7% higher than FY2023 but 3.0% lower when
measured on an organic, constant currency basis.
In the first half of the financial year our order book grew marginally thanks
to lower levels of output driven by our customers' scheduled demand. In the
second half our output levels increased but when measured at a Group level
order intake was broadly the same as the first half with the result that our
book to bill ratio fell to 0.91x and the order book closed the year at
£104.5m. By historical measures this is still at a good level but our
customers, particularly in the Industrial segment, are reluctant to place
orders for multiple months reflecting their own uncertainty regarding their
end markets.
We set out in our strategy in 2023 that we would review the Group's portfolio
of products to determine whether they were sufficiently differentiated to
generate the level of returns that supported the Group's journey to mid-teen
returns. As a result of that review, we concluded that the majority of
products supplied by our EM4 facility in Boston did not reach that threshold
and as a result the business should be sold. We did, however, ensure prior to
the sale that we transferred out of EM4 to another G&H facility a
technology for fibre fusing that is differentiated and is employed in the
modules we supply into advanced photolithography equipment. The sale of the
business was completed in March 2024 and as a result the financial statements
have been re-presented to exclude the results of this discontinued operation.
The lower revenue described above pulled the Group's adjusted operating profit
margin lower to 7.7% (2023: 9.0%). Whilst margins progressed in our A&D
and Life Sciences segments thanks to additional volumes and some progress on
operational efficiencies, margins fell back in our Industrial segment as a
result of the lower volumes. We continue to support our R&D programmes
with further engineering recruitment and our spend in this area increased to
£7.8m (5.8% of revenue) compared with £7.4m (5.5% of revenue) in the
previous year.
After the impact of adjusting items which totalled £3.7m (2023: £4.3m) the
full year statutory operating profit was £6.8m (2023: £7.8m). The loss on
disposal of the EM4 business totalled £9.2m and when this is combined with
the trading of that business in the period up to its sale the total post tax
loss from discontinued operations was £9.7m (2023: £0.8m), bringing the
total post tax loss of the Group for the year to £6.4m (2023: profit of
£4.0m).
Adjusted EPS totalled 25.5 pence (2023: 33.9 pence) reflecting the Group's
reduced adjusted operating profit in the year. Reported basic earnings per
share from continuing operations was 12.7 pence (2023: 19.4 pence) and basic
(loss) / earnings from continuing and discontinued operations was (24.7p)
(2023: 16.1p)
During the year we invested £5.2m in additional equipment and systems to
support the Group's operations and future growth. Net working capital level
increased by £3.6m as a result of the settlement of high payables balances on
the September 2023 balance sheet in the first quarter of the year. Our
inventory turns and debtor days metrics both improved across the course of the
financial year. Cash flow from operating activities totalled £14.2m (2023:
£16.2m). We ended the year with net debt of £25.8m (2023: £31.7m) including
IFRS 16 lease liabilities of £9.9m (2023: £10.8m). Dividend payments
totalled £3.4m (2023 - £3.2m). At 30 September 2024 leverage was 0.9x (2023:
1.1x).
Revenue
REVENUE
2024 2023
Year ended 30 September £'000 % £'000 %
Industrial 67,947 50.0% 74,709 55.3%
A&D 34,459 25.3% 27,339 20.2%
Life Sciences 33,584 24.7% 32,993 24.5%
Group Revenue 135,990 100% 135,041 100%
Group revenue from continuing operations totalled £136.0m (2023: £135.0m).
Group revenue was 3.0% lower than the prior year once the impact of exchange
movement and the full year benefits of Artemis and GS Optics which were
acquired during the course of FY2023 are excluded. Revenue in the second half
grew 15% compared with the first half on an organic, constant currency basis.
We saw full year organic, constant currency revenue growth from both our
A&D and Life Sciences markets, by 10.3% and 1.3% respectively but in our
Industrial markets revenue declined on the same measure by 9.7%. In our
A&D business we are experiencing strong demand for our super polished
components used in ring laser gyroscopes as well as a general pick-up in
demand for precision optics used in defence applications. We expect our order
book for this segment to grow further in FY2025 given the number of proposals
we are currently providing to customers.
In our Life Sciences markets we saw good growth in revenue for our medical
diagnostic instruments. Two of our customers' instrument programmes
transitioned into full rate production and those devices performed well in the
market generating higher levels of demand than our customers had anticipated,
resulting in additional volumes for our ITL business. We were also pleased to
be able to record our first revenue from our new North American Life Sciences
centre of excellence in our Rochester facility. Offsetting these gains we saw
a sharp reduction in our revenue from the medical laser market. This market is
characterised by a small number of large OEMs who found themselves in an
overstocked position entering FY2024. As a result those customers pushed out
H1 FY2024 deliveries in order to correct their inventory holdings. We started
to see some resumption of demand in the second half of the year but overall
our revenue finished the year significantly lower than the previous period.
We faced a similar effect in our Industrial segment where many of our
industrial laser customers entered FY2024 in an overstocked position. As a
result revenue for our Industrial segment in the first half was 13.4% lower
than the prior period on an organic, constant currency basis. Whilst trading
levels improved in the second half the segment's revenue finished FY2024 9.7%
lower than the prior year. Despite the headwinds in our principal industrial
markets we did see good growth from our subsea data cable market. This was a
result of securing an important new customer win, for the provision of a
complex amplifier module, as well as increasing activity with our principal
existing customer.
Operating profit and margin
The Group's adjusted operating profit from continuing operations was £10.5m
(2023: £12.1m) and statutory operating profit from continuing operations was
£6.8m (2023: £7.8m) after a charge of £3.7m (2023: £4.3m) for items
excluded from adjusted operating profit. This included:
· Acquisition costs of £2.2m (2023: £2.8m) of which £2.0m (2023:
£1.7m) related to the non-cash amortisation charges on intangible assets
arising on the Group's historical business combinations. The remaining £0.2m
(2023: £1.2m) related to costs associated with the acquisitions of GS Optics
and Artemis in FY 2023.
· Restructuring costs of £0.9m (2023: £0.6m) associated with the
restructuring of the Group's operations and other non-recurring charges.
· Site closure costs of £0.5m (2023: £0.9m) associated with the
closure of the Group's facility in Shanghai and in the prior year the closure
of a small facility in Virginia and the consolidation of its activities in to
our facility in Rochester, NY.
The adjusted operating margin of 7.7% (2023: 9.0%) reflects the impact of
lower volumes especially in our Industrial segment. In the first half the
business was significantly impacted by some of our principal industrial laser
customers adjusting their inventory holding lower. We saw some improvement in
the second half with our revenue into this segment 16% higher than the first
half which helped to lift adjusted operating profit margins from 10.9% in the
first half to 11.8% in the second half. Despite difficult trading conditions
in our industrial laser markets the subsea data cable market continued to be a
good one for us. Revenue grew thanks to our principal end customer winning new
networks installations. We were also pleased to secure a customer for a new
amplifier module, the output from one of our technology roadmaps. That
programme win will support margin accretion as the project migrates to volume
production in the coming financial year. The progressive migration of more of
our hi-reliability fibre coupler build to our south east Asian sub-contractor
also supports further margin progression for the Group in this segment in the
coming year.
Within our Life Sciences business we saw a significant slowdown of demand from
our medical laser customers in the first half. And despite further growth in
our deliveries to medical diagnostic instrument customers our revenue in the
first half were 5.9% lower on an organic, constant currency basis. Similar to
our Industrial segment, revenue recovered to some extent in the second half
albeit at a subdued level in the medical laser market but deliveries to our
medical diagnostic customers grew again. Revenue in the second half was 22.8%
higher than the first half. Despite the growth in revenue, operating margins
declined from 14.7% in the first half to 13.1% in the second. As some of our
medical diagnostic programmes migrated to high volumes pre negotiated pricing
reductions came in to force and in our medical laser markets we face growing
competition from lower cost Asian competition that is driving the price points
in the market lower and impacting the Group's margins from these product
lines. We are currently assessing our strategy for the medical laser market.
In our A&D market we are seeing good growth in demand. First half revenue
was 19.6% higher on an organic, constant currency basis compared with the
first half of FY2023 and we saw further growth in the second half which was
6.7% higher than the first half on the same measure. The additional volume is
helping to lift adjusted margins which moved from a loss of 9.4% in the first
half to a profit of 2.2% in the second half. The more complex sighting systems
often incorporating our advanced laser protection filtering that we are
providing our customers generate better margins that our less complex
precision optic components. Nevertheless, we are still experiencing lower
yields and higher scrap rates in some of our precision optic facilities than
we would like. This has been partially driven by high numbers of newly
recruited production team members less experienced in the handling of
precision optics through the production process. Improvements in this area
will be a focus for us in the coming year.
We made further additions to our R&D teams and our total spend on product
development activities increased to £7.8m (2023: £7.4m). We also added to
our sales and business development teams especially in our life sciences
segment in order to support the future growth of our business and, in
particular, the North American medical diagnostic instrument market,
leveraging the investments we have made in establishing our Life Sciences
Centre of Excellence in Rochester, NY State. Despite the weaker demand we are
currently seeing from our Industrial and Medical Laser markets we are ensuring
the business is well positioned to benefit once those markets return to
growth.
A reconciliation between adjusted profit and statutory profit is shown
overleaf.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating profit Net finance (costs) / income Profit before tax Taxation Earnings per share Operating cash flow
Year ended 30 September 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
£000 £000 £000 £000 £000 £000 £000 £000 pence pence £000 £000
Reported 6,812 7,814 (2,604) (1,812) 4,208 6,002 (931) (1,145) 12.7p 19.4p 14,247 16,164
Acquisition costs 228 1,156 209 57 437 1,213 (85) (83) 1.4p 4.5p 134 1,116
Amortisation of acquired intangible assets 2,002 1,672 - - 2,002 1,672 (462) (327) 5.9p 4.7p - -
Restructuring and site closure 1,460 1,450 - - 1,460 1,450 (59) (291) 5.5p 5.3p 2,323 934
Adjusted 10,502 12,092 (2,395) (1,755) 8,107 10,337 (1,537) (1,846) 25.5p 33.9p 16,704 18,214
Discontinued operations
The loss from discontinued operations in the period totalled £9.7m. This
comprised a loss on disposal of the EM4 business of £9.2m, a trading loss in
the period of £0.6m (2023: profit of £0.3m) and a tax credit of £0.2m. The
EM4 business had received two contract cancellations in the months leading up
to its disposal in March 2024 which had impacted its trading performance in
the year.
Finance costs
Net adjusted finance costs totalled £2.4m (2023: £1.8m) with the increase
due to the higher drawn debt levels following the acquisition of the Artemis
and GS Optics businesses in FY2023. Included within these costs is a charge of
£0.5m (2023: £0.3m) in respect of lease interest. The additional property
leases taken on as a result of the acquisition of Artemis and GS Optics,
including the additional space taken for our North American Life Sciences
centre of excellence explain the increase compared to the previous year.
Further details of the Group's debt facilities are set out below.
Taxation
The Group's overall tax charge was £0.9m (2023: £1.1m) including a £0.6m
credit (2023: £0.7m) in respect of items excluded from adjusted profit. The
adjusted tax charge was £1.5m (2023: £1.8m) resulting in an effective tax
rate of 19.0% (2023: 17.9%). 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 as well as the tax incentives for investment
available to the Group.
During the year, we performed a review of our deferred tax accounting across
each of the jurisdictions in which we operate. This review identified that
we were entitled to, and should have, recognised a deferred tax asset in
respect of accumulated trading losses in our US tax group. Accordingly we
have restated the balance sheet as at 30 September 2022 to recognise
additional deferred tax assets of £2.5m in respect of losses. In accordance
with IAS12, we have also netted deferred tax assets and deferred tax
liabilities where they relate to taxes levied by the same taxation authority
on the same taxable entity. The effect of this was to net deferred tax assets
of £4.7m and £4.5m against the deferred tax liabilities as at 30 September
2023 and 30 September 2022 respectively. There is no effect from this
adjustment on the income statement for the year ended 30 September 2023 or
2024.
Earnings Per Share
Basic adjusted earnings per share reduced to 25.5 pence (2023: 33.9 pence),
reflecting the reduced adjusted profit in the period. Basic earnings per share
from continuing operations were 12.7 pence (2023: 19.4 pence) and basic (loss)
/ earnings per share from continuing and discontinued operations were
(24.7p) (2023: 16.1p). This reduction was driven by the reduction in adjusted
operating profit and the small year on year difference in adjusting items set
out above.
Cash flow
Cash flow generated from operating activities was £14.2m (2023: £16.2m).
During the first half of the financial year the Group increased its net
working capital by £3.6m principally as a result of settling high creditor
balances on the September 2023 balance sheet. In the second half working
capital levels were held broadly flat despite increasing levels of output
thanks to improving disciplines around inventory management and strong
collections of receivables.
Our net capital expenditure totalled £5.2m (2023: £6.8m). Investment levels
reduced in the year given the significant non-recurring investments made in
the previous financial year in establishing our contract manufacturing partner
for the production of our products as well as investments in our precision
optics production facility at Ilminster. Notable spend in FY2024 included the
fit out of the North American Life Sciences centre of excellence in Rochester,
NY State and the implementation of the Group's ERP systems in the Artemis and
GS Optics businesses.
The net cash inflow from the sale of our EM4 business in March 2024 totalled
£1.7m. This comprised consideration received of £4.2m less transaction fees
and other costs incurred of £2.1m and cash included in the business at sale
of £0.4m. Working capital and net debt adjustments resulted in a repayment of
£0.7m to the purchaser. The net proceeds from the sale were used to reduce
the Group's borrowings. The consideration for the sale of the business
included a deferred, contingent element of up to $6.75m (£5.1m) based upon
the performance of the business in the period ending 30 September 2025. We
have assessed the fair value of this deferred, contingent consideration as
£nil.
Deferred, contingent consideration was payable by the Group on its purchase of
the Artemis and GS Optics businesses in FY2023. The GS Optics business failed
to achieve the levels required in order for a payment to be made and no
further amounts are now due in respect of that acquisition. The first
measurement point for the deferred, contingent consideration for the purchase
of the Artemis business was the year ended 31 July 2024 and a payment of
£343k was made. The final element of the deferred, contingent consideration
is dependent upon the business' financial performance in the period ending 31
July 2025.
Dividend payments in the year totalled £3.4m (2023: £3.2m).
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. The Group's facility comprises a
committed $50m revolving credit facility (RCF) with a further $20m uncommitted
accordion facility. At 30 September 2024, the Group had drawn $30.4m leaving
undrawn committed and uncommitted facilities of $39.6m. The RCF matures in
March 2027.
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 2024 net debt/adjusted EBITDA was 0.9x (30 September
2023: 1.1x). Interest cover at 30 September 2024 was 5.9x (30 September 2023:
9.0x).
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 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 2024, 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 8.3 pence per share (FY2023: 8.2p), giving a total of 13.2 pence
per share (FY2023: 13.0p) for the year when combined with the 4.9 pence per
share paid as an interim dividend in July 2024 (FY2023: 4.8p). 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 this remaining net risk 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.
2024 2023
Income Statement Average rate
USD/GBP 1.27 1.23
Euro/GBP 1.17 1.15
Balance Sheet Closing rate
USD/GBP 1.34 1.22
Euro/GBP 1.20 1.15
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 2024
30 September 2024 30 September 2023*
Note Underlying Non-underlying Total Underlying Non-underlying Total
Continuing operations (Note 4) (Note 4)
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 135,990 - 135,990 135,041 - 135,041
Cost of revenue (94,341) - (94,341) (94,746) - (94,746)
Gross profit 41,649 - 41,649 40,295 - 40,295
Research and development expense (7,828) - (7,828) (7,372) - (7,372)
Sales and marketing expenses (8,474) - (8,474) (8,942) - (8,942)
Administration expenses (15,674) (3,690) (19,364) (12,724) (4,278) (17,002)
Other income 829 - 829 835 - 835
Operating profit 2 10,502 (3,690) 6,812 12,092 (4,278) 7,814
Finance income 40 - 40 11 - 11
Finance costs (2,435) (209) (2,644) (1,766) (57) (1,823)
Profit before income tax expense 8,107 (3,899) 4,208 10,337 (4,335) 6,002
Income tax expense 3 (1,537) 606 (931) (1,846) 701 (1,145)
Profit from continuing operations 6,570 (3,293) 3,277 8,491 (3,634) 4,857
Loss after tax from discontinued operations - (9,654) (9,654) - (809) (809)
Profit / (loss) for the year 6,570 (12,947) (6,377) 8,491 (4,443) 4,048
Earnings / (loss) per share
From continuing operations
Basic earnings per share 5 25.5p (12.8p) 12.7p 33.9p (14.5p) 19.4p
Diluted earnings per share 5 25.1p (12.6p) 12.5p 33.5p (14.3p) 19.2p
From continuing and discontinued operations
Basic earnings / (losses) per share 5 25.5p (50.2p) (24.7p) 33.9p (17.8p) 16.1p
Diluted earnings / (losses) per share 5 25.1p (49.8p) (24.7p) 33.5p (17.5p) 16.0p
*The results for the year ended 30 September 2023 have been re-presented to
show the effect of discontinued operations.
Group Statement of Comprehensive Income
For the year ended 30 September 2024
Restated
2024 2023
£000 £000
(Loss) / profit for the year (6,377) 4,048
Other comprehensive income / (expense) - items that may be reclassified
subsequently to profit or loss
Gains on cash flow hedges 126 1,287
Exchange differences on translation of foreign operations (4,844) (6,259)
Exchange differences on translation of discontinued operation 132 244
Other comprehensive expense for the year net of tax (4,586) (4,728)
Total comprehensive expense for the year attributable to the shareholders of (10,963) (680)
Gooch & Housego PLC
Arising from:
Continuing operations (1,441) (115)
Discontinued operations (9,522) (565)
Total comprehensive expense for the year attributable to the shareholders of (10,963) (680)
Gooch & Housego PLC
Group Balance Sheet
As at 30 September 2024
As restated As restated
2024 2023 2022
£000 £000 £000
Non-current assets
Property, plant and equipment 37,915 41,818 42,447
Right of use assets 9,180 9,932 5,063
Intangible assets 51,051 59,729 47,939
98,146 111,479 95,449
Current assets
Inventories 30,631 37,582 37,073
Trade and other receivables 30,908 34,075 35,598
Cash and cash equivalents 6,622 7,294 5,999
68,161 78,951 78,670
Current liabilities
Trade and other payables (18,075) (21,156) (22,765)
Borrowings (10) (10) (64)
Lease liabilities (1,289) (1,443) (1,732)
Income tax liabilities (2,005) (581) (578)
(21,379) (23,190) (25,139)
Net current assets 46,782 55,761 53,531
Non-current liabilities
Borrowings (22,563) (28,157) (18,730)
Lease liabilities (8,570) (9,394) (4,539)
Provisions for other liabilities and charges (1,429) (1,582) (848)
Deferred consideration - (870) -
Deferred income tax liabilities (3,978) (5,223) (3,827)
(36,540) (45,226) (27,944)
119,119
Net assets 108,388 122,014 121,036
Shareholders' equity
Capital and reserves
attributable to equity shareholders
Called up share capital 5,159 5,159 5,008
Share premium account 16,051 16,051 16,000
Merger reserve 11,561 11,561 7,262
Cumulative translation reserve 5,101 9,813 15,828
Hedging reserve 141 15 (1,272)
Retained earnings 70,375 79,415 78,210
Total equity 108,388 122,014 121,036
Group Statement of Changes in Equity
For the year ended 30 September 2024
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 2022 5,008 16,000 7,262 75,715 (1,272) 15,828 118,541
Restatement - - - 2,495 - - 2,495
As restated 5,008 16,000 7,262 78,210 (1,272) 15,828 121,036
Profit for the financial year - - - 4,048 - - 4,048
Other comprehensive income / (expense) for the year - - - - 1,287 (6,015) (4,728)
Total comprehensive income / (expense) for the year - - - 4,048 1,287 (6,015) (680)
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 79,415 15 9,813 122,014
At 1 October 2023 5,159 16,051 11,561 79,415 15 9,813 122,014
Loss for the financial year - - - (6,377) - - (6,377)
Other comprehensive income / (expense) for the year - - - - 126 (4,712) (4,586)
Total comprehensive income / (expense) for the year - - - (6,377) 126 (4,712) (10,963)
Dividends 6 - - - (3,378) - - (3,378)
Share-based payments - - - 715 - - 715
Total contributions by and distributions to owners of the parent recognised - - - (2,663) - - (2,663)
directly in equity
At 30 September 2024 5,159 16,051 11,561 70,375 141 5,101 108,388
Group Cash Flow Statement
For the year ended 30 September 2024
2024 2023
Note £000 £000
Cash flows from operating activities
Cash generated from operations 7 14,247 16,164
Income tax (paid) / repaid (62) 2
Net cash generated from operating activities 14,185 16,166
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (351) (11,697)
Disposal of subsidiaries, net of cash disposed 1,665 -
Purchase of property, plant and equipment (3,526) (6,257)
Sale of property, plant and equipment - 516
Purchase of intangible assets (1,716) (1,062)
Interest received 40 11
Net cash used in investing activities (3,888) (18,489)
Cash flows from financing activities
Drawdown of borrowings 4,731 19,154
Repayment of borrowings (8,046) (8,378)
Principal elements of lease payments (1,715) (1,624)
Interest paid (2,487) (1,784)
Dividends paid to ordinary shareholders (3,378) (3,180)
Net cash (used in) / generated from financing activities (10,895) 4,188
Net (decrease) / increase in cash (598) 1,865
Cash at beginning of the year 7,294 5,999
(74) (570)
Exchange losses on cash
Cash at the end of the year 6,622 7,294
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
2023 have been taken from the Group's audited statutory financial statements
on which the Group's auditors, PricewaterhouseCoopers LLP, expressed an
unqualified opinion, and which have been filed with the registrar of
companies.
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 September 2024, as described in
those financial statements, on which the Group's auditors,
PricewaterhouseCoopers LLP have expressed an unqualified opinion, but which
have not yet been filed with the registrar of companies.
There was no statement in the audit report for either the year ended 30
September 2024 or 2023 relating to section 498(2) or 498(3) of the Companies
Act 2006.
During the year, we performed a review of our deferred tax accounting across
each of the jurisdictions in which we operate. This review identified that
we were entitled to, and should have, recognised a deferred tax asset in
respect of accumulated trading losses in our US tax group. Accordingly we
have restated the balance sheet as at 30 September 2022 to recognise
additional deferred tax assets of £2.5m in respect of losses. In
accordance with IAS12, we have also netted deferred tax assets and deferred
tax liabilities where they relate to taxes levied by the same taxation
authority on the same taxable entity. The effect of this was to net deferred
tax assets of £4.7m and £4.5m against the deferred tax liabilities as at 30
September 2023 and 30 September 2022 respectively. There is no effect from
this adjustment on the income statement for the year ended 30 September 2023
or 2024.
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.
A&D Life Sciences Industrial Corporate Total
£000 £000 £000 £000 £000
For year ended 30 September 2024
Revenue
Total revenue 37,563 34,918 70,631 - 143,112
Inter and intra-division (3,104) (1,334) (2,684) - (7,122)
External revenue 34,459 33,584 67,947 - 135,990
Divisional expenses (33,426) (27,875) (57,298) 910 (117,689)
EBITDA¹ 1,033 5,709 10,649 910 18,301
EBITDA % 3.0% 17.0% 15.7% - 13.5%
Depreciation and amortisation (2,547) (1,786) (3,428) (1,726) (9,487)
Operating (loss) / profit before amortisation of acquired intangible assets (1,514) 3,923 7,221 (816) 8,814
Amortisation of acquired intangible assets - - - (2,002) (2,002)
Operating (loss) / profit (1,514) 3,923 7,221 (2,818) 6,812
Operating (loss) / profit margin % (4.4%) 11.7% 10.6% - 5.0%
Add back non-underlying items and amortisation of acquired intangibles 322 704 626 2,038 3,690
Adjusted operating (loss) / profit (1,192) 4,627 7,847 (780) 10,502
Adjusted (loss) / profit margin % (3.5%) 13.8% 11.5% - 7.7%
Net finance costs (188) (67) (232) (2,117) (2,604)
(Loss) / profit before income tax expense (1,702) 3,856 6,989 (4,935) 4,208
2. Segmental analysis (continued)
A&D Life Sciences Industrial Corporate Total
£000 £000 £000 £000 £000
For year ended 30 September 2023
Revenue 28,893 35,132 78,326 - 142,351
Total revenue
Inter and intra-division (1,554) (2,139) (3,617) - (7,310)
External revenue 27,339 32,993 74,709 - 135,041
Divisional expenses (27,712) (28,535) (61,784) 926 (117,105)
EBITDA¹ (373) 4,458 12,925 926 17,936
EBITDA % (1.4%) 13.5% 17.3% - 13.3%
Depreciation and amortisation (1,930) (1,129) (3,497) (1,894) (8,450)
Operating (loss) / profit before amortisation of acquired intangible assets (2,303) 3,329 9,428 (968) 9,486
Amortisation of acquired intangible assets - - - (1,672) (1,672)
Operating (loss) / profit (2,303) 3,329 9,428 (2,640) 7,814
Operating (loss) / profit margin % (8.4%) 10.1% 12.6% - 5.8%
Add back non-underlying items and amortisation of acquired intangibles 455 983 1,168 1,672 4,278
Adjusted operating (loss) / profit (1,848) 4,312 10,596 (968) 12,092
Adjusted (loss) / profit margin % (6.8%) 13.1% 14.2% - 9.0%
Net finance costs (70) (67) (172) (1,503) (1,812)
(Loss) / profit before income tax expense (2,373) 3,262 9,256 (4,143) 6,002
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 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:
2024 2024 2024 2023 2023 2023
Assets Liabilities Net Assets Assets Liabilities Net Assets
£000 £000 £000 £000 £000 £000
United Kingdom 79,846 (35,743) 44,103 83,107 (47,308) 35,799
USA 86,276 (22,013) 64,263 106,209 (20,503) 85,706
Continental Europe 83 (148) (65) 198 (84) 114
Asia Pacific 102 (15) 87 916 (521) 395
166,307 (57,919) 108,388 190,430 (68,416) 122,014
For the year to 30 September 2024 non-current asset additions were £3.0m
(2023: £4.0m) for the UK and for the USA £7.0m (2023: £6.6m). There were no
additions to non-current assets in respect of Europe (2023: £nil) or the Asia
Pacific region (2023: £nil). The value of non-current assets in the USA was
£64.3m (2023: £66.2m) and in the United Kingdom £44.1m (2023: £45.5m).
There were no non-current assets in Europe or the Asia-Pacific region.
Analysis of revenue from continuing operations by destination:
2024 2023
£000 £000
United Kingdom 36,849 27,146
North America 46,601 47,568
Continental Europe 27,202 33,674
Asia Pacific and Other 25,338 26,653
Total revenue 135,990 135,041
3. Income tax expense
Analysis of tax charge / (credit) in the year
2024 2023
£000
£000
Current taxation
UK Corporation tax 1,963 843
Overseas tax (212) 703
Adjustments in respect of prior years 107 (1,130)
Total current tax 1,858 416
Deferred tax
Origination and reversal of temporary differences (321) (176)
Adjustments in respect of prior years (606) 874
Change to UK tax rate - 31
Total deferred tax (927) 729
Income tax expense per income statement 931 1,145
Income tax on discontinuing operations (222) (173)
4. Non-underlying items
2024 2023
£000
£000
Included within administration expenses
Amortisation of acquired intangible assets 2,002 1,672
Acquisition costs 228 1,156
Restructuring costs 911 571
Site closure costs 549 879
3,690 4,278
Included within finance costs
Unwind of discount on deferred consideration 209 57
209 57
Included within taxation
Tax effect of the non-underlying items above (606) (747)
(606) (747)
Acquisition costs of £0.2m (2023: £1.2m) related to costs incurred in
relation to the acquisitions of GS Optics and Artemis in the year ended 30
September 2023.
Restructuring costs of £0.9m (2023: £0.6m) 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 £0.5m (2023: £0.9m) related to the wind down of the
Group's small facility in Shanghai. In the year ended 30 September 2023, the
costs related to both the closure of the Shanghai facility and the transfer of
the Group's ITL business' US operation from its site in Virginia into the GS
Optics campus in Rochester.
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 2024 is given below:
2024 2023
Number of shares used for basic earnings per share 25,786,397 25,085,805
Number of dilutive shares - impact of share options granted 394,682 272,361
Number of shares used for dilutive earnings per share 26,181,079 25,358,166
A reconciliation of the earnings used in the earnings per share calculation is
set out below:
2024 2023
£000 pence £000 pence
per share per share
Basic earnings per share from continuing operations 3,277 12.7p 4,857 19.4p
Amortisation of acquired intangible assets (net of tax) 1,540 5.9p 1,175 4.7p
Acquisition costs 195 0.8p 1,071 4.3p
Site closure costs 658 2.6p 728 2.9p
Restructuring costs (net of tax) 743 2.9p 600 2.4p
Unwind of discount on deferred consideration 157 0.6p 59 0.2p
Total adjustments net of income tax expense 3,293 12.8p 3,633 14.5p
Adjusted basic earnings per share 6,570 25.5p 8,490 33.9p
Basic diluted earnings per share 3,277 12.5p 4,857 19.2p
Adjusted diluted earnings per share 6,570 25.1p 8,490 33.5p
Basic and diluted loss per share from discontinuing operations (9,654) (37.4p) (810) (3.2p)
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
2024 2023
£000
£000
Final 2023 dividend: 8.2p per share (Final 2022 dividend paid in 2023: 7.7p) 2,114 1,978
2024 Interim dividend of 4.9p per share (2023: 4.8p per share) 1,264 1,202
3,378 3,180
The Directors have proposed a final dividend of 8.3p per share making the
total dividend paid and proposed in respect of the 2024 financial year 13.2p.
(2023: 13.0p per share). The total value of the proposed final dividend is
£2,140,000 (2023: £2,114,000).
7. Cash generated from operating activities
2024 2023
£000 £000
Profit before income tax from continuing operations 4,208 6,002
Loss before income tax from discontinued operations (9,876) (982)
Adjustments for:
- Amortisation of acquired intangible assets 2,002 1,672
- Amortisation of other intangible assets 1,755 1,692
- Loss on disposal of subsidiary 8,910 -
- Loss on disposal of property, plant and equipment 128 234
- Depreciation 7,732 7,652
- Share based payment charge 715 337
- Amounts claimed under the RDEC (392) (200)
- Finance income (40) (11)
- Finance costs 2,696 1,784
Total 23,506 13,160
Changes in working capital
- Inventories 257 (1,291)
- Trade and other receivables 863 1,005
- Trade and other payables (4,711) (1,730)
Total (3,591) (2,016)
Cash generated from operating activities 14,247 16,164
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