RNS Number:7242S
Gooch & Housego PLC
02 December 2003
FOR IMMEDIATE RELEASE 2 December 2003
GOOCH & HOUSEGO PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2003
"positive contribution from each of the group's companies"
Gooch & Housego PLC, the specialist manufacturer of acousto-optic and
electro-optic devices, precision optical components, crystals, and instruments
for measuring optical radiation, today announces preliminary results for the
year ended 30 September 2003.
Highlights
* Group turnover increased by 2.0% to #15.91m (2002: #15.59m)
* Profit before tax increased from #2.02m to #2.19m, an increase of
8.4%
* Significant cash generation reducing net debt to only #0.31m
(2002: #0.95m), net gearing of only 3% (2002: 8%)
* Strong balance sheet enabling future growth through investment in
buildings and capital equipment, development of new products and
possible acquisitions.
Archie Gooch, Chairman of Gooch & Housego, commented, "The Group has achieved
modest growth in revenues and profits in what has been a difficult economic
climate with many uncertainties. I believe the group is in a stronger position
today than it was a year ago. We are implementing strategy for growth while at
the same time consolidating our current position by taking care of our valued
customers through close attention to quality delivery and service."
For further information:
Gareth Jones
Ian Bayer 01460 52271
Gooch & Housego PLC
Barrie Newton
Rowan Dartington 0117 933 0000
Tim Thompson or Tom Carroll
Buchanan Communications 0207 466 5000
Chairman's Statement
I am pleased that the Group is able to report results for the twelve months to
30th September 2003 that are broadly in line with expectations. We have achieved
a modest growth in revenues and profits in what has been a difficult economic
climate with many uncertainties. Each of the Group companies has made a positive
contribution and it is pleasing to see Optronic Laboratories Inc return to
profit as a result of the introduction of new products, a more buoyant market
and the reorganisation that took place last year.
Financial Results
The Group's turnover increased by 2% to #15.91 million from #15.59 million in
the previous year. Operating profit, before goodwill amortisation, was #2.56
million compared with #2.48 million in 2002.
Profit on ordinary activities before tax and goodwill was #2.49 million, an
increase of 7.3%, compared with #2.32 million in the previous year. The
goodwill amortisation in the period was #302,000 the same as the previous
period.
Earnings per share, calculated before goodwill, were 9.0p an improvement on last
year's 8.7p, while the amount after charging goodwill increased from 7.0p to
7.3p.
Throughout the period, the Group generated significant amounts of cash to reduce
its net debt to #0.31 million at the year end (2002 : #0.95 million). This
reflects net gearing of only 3% (2002: 8%). The strong balance sheet will enable
the Group to fund growth through investment in buildings and capital equipment
on both sides of the Atlantic, through the development of new products and, if
appropriate, through acquisition.
Dividends
Balancing our continued strong cash position against the difficult climate in
which we are operating, and in view of the Group's performance, with only a
modest increase in profits, your Board is proposing to maintain the final
dividend at 2.0p per share making a total for the year of 3.1p per share (2002:
3.0p).
Subject to approval at the Annual General Meeting, the final dividend will be
payable on 12th February 2004 to all shareholders on the register on 10th
December 2003. The shares are expected to go ex-dividend on 12th December 2003.
Review
The Group has an enviably strong market position and several of our products are
world leaders. While this enables us to perform consistently, even in difficult
times, it does not, in itself, lead to growth. I believe that in order to grow
at rates approaching those we achieved during the mid 1990's we need to
introduce new products and services. This will not be an overnight process. We
are focussing on achieving solid medium to long-term growth through the
introduction of new products, and, if suitable opportunities arise, through
acquisition. It is to help realise these objectives that we appointed Professor
Chris Pannell as Group Chief Scientist earlier in the year and I welcome him on
board.
I have previously reported on our plans to build a new factory and headquarters
building in Ilminster. This continues to be a top priority. Although we have a
site upon which we could build, we are currently considering alternative, larger
sites that would provide us with greater ground floor area and more scope for
expansion in the future. We have also made the decision to build a new factory
in Melbourne, Florida, for NEOS Technologies Inc.
Directors
David Irish and Heather Virgin will retire at the end of 2003 and will step down
from the board at the same time. I was responsible for bringing David into the
company as a school leaver nearly forty-five years ago and I am pleased to be
able to say that my assessment of him as a promising young man who could go far
in the company has proved to be correct. I would like to thank David for his
dedication and application over the years, although we will continue to benefit
from his experience in a part-time capacity for some time to come. I would also
like to thank my daughter, Heather, who has served very ably as Personnel
Director since 1983. David and Heather have been valued members of the board and
I wish them both a happy retirement.
It is encouraging to me that we have so many high quality young people building
careers in the company, who will be able to step into the shoes of people like
David and Heather.
I would like to thank our entire workforce for their contribution in enabling us
to make steady progress this year against the backdrop of trading conditions
that continue to be difficult.
Overall, I believe the Group is in a stronger position today than it was a year
ago. We are implementing a strategy for growth while at the same time
consolidating our current position by taking care of our valued customers
through close attention to quality, delivery and service.
A. W. Gooch MBE JP
Operations Review
The past year has seen the Gooch & Housego Group maintain its trading
performance and solid market position while at the same time preparing for
future growth through investment in facilities and new product development.
Sales increased by 2% over the previous year, with operating profits rising by
3.8%. With approximately two thirds of our revenues coming from the USA, the
fall in the value of the dollar in the second half of the year has had a
negative effect on our published results, which, therefore, do not fully reflect
our progress this year. Overall, I believe we have achieved reasonable results
in a difficult climate.
Since re-joining the Group at the beginning of 2003, I have concentrated on
positioning the Group for future growth. Through investment in new facilities
and capital equipment in the UK and USA, we are planning to increase capacity
and improve efficiency. By exploiting the synergies, both commercial and
technical, between the Group companies, we aim to sell more of our current
products through greater geographical coverage and in parallel develop new
products and capabilities. This will be facilitated by the recent appointment of
a Chief Scientist this year to coordinate and drive forward new product
development across the Group.
The Group companies continue to occupy leading positions in several of their
spheres of activity and enjoy excellent relationships with key customers. It is
important that we maintain this edge in order to stay ahead of the competition,
particularly from the Far East, which remains strong. Customer demands are being
raised each year and we must respond by striving to be better at everything we
do.
Financial review
During the year turnover increased by 2% to #15.9 million from #15.6million
while operating profit, before goodwill amortisation, improved from #2.5million
last year to #2.6million an increase of 3% over the year. Operating profit,
after goodwill increased from #2.2 million to #2.3 million while profit before
tax showed further improvement of #0.2million to #2.2million. Despite difficult
trading conditions the Group's operating margin has been maintained at 14.2%
(2002 :14.0%).
Turnover and operating profits have been adversely impacted by the strength of
sterling relative to the US dollar which is the functional currency for the
Group's subsidiaries. Had the current year's results been translated at the
average rates prevailing for last year, as compared to those during the current
year, Group revenues would have been #0.9 million higher than reported and Group
operating profit would have been increased by #149,000.
Finance charges were reduced during the year by 55% to #74,000, reflecting the
reduction in net debt over the last year, while net gearing has fallen from 8%
to 3%.
Details of the proposed final dividend are contained in the Chairman's. Earnings
per share for the year was 9.0p (2002 :8.7p) before goodwill amortisation and
7.3p (2003: 7.0p) after. Goodwill amortisation has remained consistent in both
years at #0.3 million.
Operations - United Kingdom
Gooch & Housego
In the UK, sales for Gooch & Housego (G&H) were #5.65 million (2002: #5.47
million) with operating profits at #0.9 million (2002: #1.09 million). These
figures reflect the generally flat market conditions that we are experiencing,
although revenues and profits were greater in the second half of the year,
giving some signs of an improving climate. Order intake for both optical
components and acousto-optic devices exceeded sales by 15%, leaving the order
book at the end of the year stronger than at the start of the period.
The traditional core business of manufacturing precision optical components has
performed well in a difficult climate with sales growing by 8%. We believe that
this is primarily as a result of our efforts to build on the close relationships
that we have established with key customers. By delivering quality product in a
timely manner and by providing a "one stop shop" for complex optical systems
requirements G&H is strengthening its position as supplier of choice. In a world
in which main contractors are seeking to reduce the number of their suppliers
our broad range of capabilities, spanning numerous materials and component types
in the ultraviolet, visible and near-infrared regions of the spectrum, leaves G&
H well positioned to take advantage of this development. A further benefit of
this trend is the shift towards longer-term contracts with predictable monthly
shipments, which makes capacity planning more straightforward. This has enabled
us to invest in additional automated lens manufacturing equipment during the
year to keep pace with demand. On the downside, fewer but larger contracts can
result in a less even sales profile as one contract comes to an end and another
starts. Looking forward, we have some significant contracts in the pipeline that
give us confidence in the medium-term demand for our optical components.
Competition, particularly from the Far East, continues to be stiff. We are
addressing this threat by extending our capabilities and adding new equipment in
order to stay one step ahead. This is both difficult and expensive, but I am
pleased to say that so far we have been successful.
The second half of the year saw an increase in demand for the Q-switch. The
Q-switch is the single most important product of the Group. The upturn reflected
a general improvement in market sentiment rather than any underlying seasonal
bias. Once again, the overall picture is one of a generally flat market that is
showing signs of improvement. If G&H's world-leading position is to be
maintained, it is vital that the product is continually improved to meet the
ever-increasing demands of our customers. As laser manufacturers develop ever
more powerful systems, the demands on the Q-switch increase accordingly. Through
a process of continuous research and development, we have recently significantly
increased the power handling capability of some of our Q-switches and we will be
releasing several new models during the coming year.
The new factory is one of the most important factors affecting the ability of
the UK business to grow over the next five to ten years. When I rejoined G&H at
the beginning of 2003, plans were being prepared for a new building to be
constructed on land the Group had acquired. Having reviewed the design and
costing of this building, I decided that we should investigate alternative
solutions that could maximise the benefits of this significant opportunity.
Several options have been considered, one of which is currently the subject of
detailed investigation.
United States
Optronic Laboratories
Optronic Laboratories Inc (OLI) has experienced improving market conditions
during the year and has reported sales of #2.88 million (2002: #2.51 million)
with an operating profit of #119,000 (2002: operating loss of #231,000).
Factors contributing to this year's improved results include a continued focus
on the company's core spectroradiometry business, the general improvement in
economic conditions in the US, the increased demand for instruments configured
for night-vision systems testing as a consequence of the conflict in the Middle
East, and the success of the new OL770 instrument.
The OL770 is the first completely new OLI instrument for a number of years and
offers a combination of price and performance that has been particularly well
received. Configurable to address a number of specific applications, the initial
version was optimised for light emitting diode (LED) measurements, and in
particular the growing market for instruments to characterise the new generation
of LEDs being developed for general-purpose lighting applications. In the middle
of the year, a second version designed for the characterisation of displays was
launched, further extending the addressable market.
Additional versions of the OL770 are planned for release next year as part of a
programme of product improvement and new product development that should see the
OLI product range continue to be competitive. OLI also supplies machined metal
parts to NEOS for use in acousto-optic devices and drivers and there is the
expectation that this business will grow as NEOS sources fewer parts from
outside the group. Against this background, there is optimism that OLI will be
able to deliver further improvements next year.
Cleveland Crystals Inc
Sales and operating profits at Cleveland Crystals Inc (CCI) were once again
biased towards the second half of the year. Operating profits increased from
#23,000 for the half year to 31st March 2003 to #502,000 (2002: #440,000) for
the full year on sales of #4.01 million (2002: #4.15 million). Before currency
conversion, sales and operating profits were both higher year on year.
CCI continues to lead the world in the growth and fabrication of crystals for
Inertial Confinement Fusion (ICF) applications. Working closely with the
Lawrence Livermore National Laboratory (LLNL), CCI has developed growth and
finishing capabilities in order to supply the crystal requirements for LLNL's
National Ignition Facility (NIF). NIF will be the largest user of these crystals
for some years to come, and this year CCI began delivering the first production
phase parts, a process that should continue beyond 2008. CCI, backed by G&H, is
committed to successfully fulfilling its obligations to this important project.
ICF projects underway in the UK, France and Japan represent further
opportunities for CCI to build upon its strong position in this important,
albeit very specialist, market.
CCI has maintained its position in the competitive market for electro-optic
devices (Pockels cells) and non-linear crystals. Several new offerings are
scheduled for release next year to supplement the established flagship products.
A broader spread of products, with continued emphasis on quality, performance
and technical service should enhance CCI's already strong position in this
market.
NEOS Technologies Inc
NEOS Technologies Inc (NEOS) has reported sales of #3.79 million (2002: #3.67
million) with operating profits of #1.04 million (2002: #1.18 million). Despite
pressure on prices sales were increased, but at the expense of a drop in margin.
This represents a satisfactory result for NEOS.
The overall market conditions are similar to those experienced by the UK
acousto-optic activities, reported above, with the outlook relatively flat.
In addition to developing new products for its existing customer base, NEOS is
working with other Group companies, and in particular with the acousto-optic
team in the UK, on the development of joint products and on deriving savings
from utilising manufacturing capabilities that exist elsewhere in the Group.
These efforts will increase competitiveness and improve margins going forward.
NEOS has acquired a building plot not far from its current facilities and has
plans to construct a new 20,000 square foot factory. These plans are at an
advanced stage and construction is scheduled to begin in early 2004 and be
completed during the summer at a cost in the region of just under #1 million.
NEOS currently occupies two leased buildings, which it has outgrown. The new
factory will enable the business to operate more efficiently while at the same
time reducing costs.
Group Level Activities
Integration and new identity
The potential of the G&H Group is greater than the sum of its parts. We have
opportunities to broaden our reach, both geographically and in terms of products
and applications, by thinking as a group rather than as four individual
businesses. There are also efficiency gains to be made, for example, by
bringing the acousto-optic activities in the UK and at NEOS more closely
together. By operating as an enlarged team we will achieve greater technical and
commercial reach and present a more potent threat to our competitors.
To reinforce this Group focus we are launching a new corporate identity in
December 2003. The purpose of the new identity, which encompasses everything
from our literature and logo to our booth at exhibitions, is to emphasise the
complementary nature of our activities to the world at large, and just as
importantly, within the Group itself. The new identity will form the cornerstone
of a focussed marketing effort in the coming year, aimed at presenting the
Group as a whole to a wider audience.
Chief Scientist; New Product Development
The appointment of Professor Chris Pannell as Group Chief Scientist earlier this
year represented a significant step for Gooch & Housego. We have a tremendous
pool of scientific and engineering talent and wealth of experience across the
group. To date these have been focussed within the individual group companies.
There are new product opportunities that transcend the subsidiary company
boundaries and require technologies and capabilities from more than one company
to come together in order to be realised. The objective is to identify these
opportunities and then harness our resources to maximum commercial effect,
delivering growth through new products that are not merely developments of
existing offerings.
Prospects
Each of the Group companies is, in one way or another, a leader in its own
sphere of activity. This position, achieved through a long-term process of
research and development and an emphasis on quality has enabled the Group to
achieve a modest growth in revenues and profits even in the difficult climate
that we have experienced in the past year. I am not anticipating market
conditions to be materially different in the coming year.
By taking advantage of opportunities to gain efficiencies and reduce costs going
forward and through the introduction of new products, it is likely that the
current levels of growth can be maintained in the coming year. Longer term, as
the new product initiatives now underway take effect, the impact on revenues and
profits should be more significant.
In addition to maximising the potential for organic growth, we will continue to
look at acquisition opportunities that are consistent with our objective of
being able to offer our customers an increasingly broad range of optoelectronic
materials, components, devices and systems.
G. C. W. Jones
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 2003
2003 2002
#'000 #'000
Turnover 15,910 15,586
Trading expenditure (13,647) (13,406)
Operating profit 2,263 2,180
Other interest receivable and similar income 50 41
Interest payable and similar charges (124) (206)
Profit on ordinary activities before taxation 2,189 2,015
Tax on profit on ordinary activities (878) (755)
Profit on ordinary activities after taxation 1,311 1,260
Dividends on equity shares (558) (540)
Retained profit for the financial year 753 720
Basic earnings per share 7.3p 7.0p
Earnings per share before goodwill amortisation 9.0p 8.7p
All operations undertaken by the group during the current year are continuing.
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 SEPTEMBER 2003
2003 2002
#'000 #'000
Profit for the financial year 1,311 1,260
Currency translation differences on foreign
currency net investments (158) (361)
Total recognised gains and losses for the financial year 1,153 899
GROUP BALANCE SHEET
AS AT 30 SEPTEMBER 2003
2003 2002
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets 4,857 5,161
Tangible assets 4,164 3,763
9,021 8,924
CURRENT ASSETS
Stocks 3,598 3,507
Debtors 3,078 3,215
Cash at bank and in hand 1,958 2,592
8,634 9,314
CREDITORS : amounts falling due within one year (3,575) (3,711)
NET CURRENT ASSETS 5,059 5,603
TOTAL ASSETS LESS CURRENT LIABILITIES 14,080 14,527
CREDITORS : amounts falling due after more than one
year (1,158) (2,197)
PROVISIONS FOR LIABILITIES AND
CHARGES (186) (188)
12,736 12,142
CAPITAL AND RESERVES
Called up share capital 3,600 3,600
Share premium account 3,404 3,404
Revaluation reserve 308 308
Profit and loss account 5,424 4,830
EQUITY SHAREHOLDERS' FUNDS 12,736 12,142
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2003
Note 2003 2002
#'000 #'000 #'000 #'000
Cash inflow from operating activities (i) 2,723 3,091
Returns on investments and servicing of finance
Interest received 36 33
Interest paid (106) (198)
Interest element of hire purchase contracts (18) (12)
Net cash outflow from returns on investments and
servicing of finance
(88) (177)
Taxation
UK tax paid (249) (444)
Overseas tax paid (450) (336)
Cash outflow from taxation (699) (780)
Capital expenditure and financial investment
Purchase of tangible fixed assets (855) (612)
Sale of tangible fixed assets 1 4
Net cash outflow from capital expenditure and
financial investment (854) (608)
Equity dividends paid (558) (522)
Cash inflow before financing 524 1,004
Financing
Repayment of bank loan (1,178) (1,017)
Capital element of hire purchase contracts (102) (78)
Net cash outflow from financing (1,280) (1,095)
Decrease in cash in the year (ii) (756) (91)
(iii)
NOTES TO THE CASH FLOW STATEMENT
(i) Reconciliation of operating profit to net cash inflow from
operating activities
2003 2002
#'000 #'000
Operating profit 2,263 2,180
Amortisation of goodwill 302 302
Amortisation of debt issue costs 16 24
Depreciation 413 464
Increase in stocks (121) (55)
(Increase)/decrease in debtors (99) 349
Decrease in creditors (51) (173)
2,723 3,091
(ii) Reconciliation of net cash outflow to movement in net debt
2003 2002
#'000 #'000
Decrease in cash in the year (756) (91)
Cash outflow from decrease in
debt and lease financing 1,280 1,095
Changes in net debt resulting from cash flows 524 1,004
New hire purchase contracts (67) (477)
Movement in debt issue costs (16) (24)
Translation difference 194 311
Movement in net debt in the year 635 814
Net debt at 1 October 2002 (947) (1,761)
Net debt at 30 September 2003 (312) (947)
(iii) Analysis of net debt
At 1 At 30
October Cash Exchange Non-cash September
2002 flow Movement movement 2003
#'000 #'000 #'000 #'000 #'000
Cash in hand and at bank 2,592 (659) 25 - 1,958
Bank overdraft - (97) 2 - (95)
(756)
Debt due after 1 year (1,882) - 80 900 (902)
Debt due within 1 year (1,212) 1,178 44 (916) (906)
Hire Purchase (445) 102 43 (67) (367)
1,280
(947) 524 194 (83) (312)
NOTES TO THE PRELIMINARY ANNOUNCEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2003
1. Basis of preparation
The unaudited financial information contained in this preliminary
announcement does not comprise statutory accounts within the meaning of Section
240 of the Companies Act 1985.
The figures in this preliminary announcement have been prepared under
generally accepted accounting policies in the United Kingdom. The accounting
policies adopted are those set out in the Annual Report and Accounts for the
year ended 30 September 2002 which includes the unqualified report of the
auditors and which have been filed with the Registrar of Companies.
2. Segmental Reporting
The analysis of turnover by destination is as follows:
2003 2002
#'000 # 000
United Kingdom 2,645 2,769
North America 9,304 9,334
Continental Europe 1,609 1,688
Other 2,352 1,795
15,910 15,586
The results by geographical origin are as follows:
United Kingdom North America Group
2003 2002 2003 2002 2003 2002
#'000 #'000 #'000 #'000 #'000 #'000
Turnover
- Continuing 5,650 5,465 10,682 10,433 16,332 15,898
Inter-segment sales (165) (46) (257) (266) (422) (312)
Sales to third parties 5,485 5,419 10,425 10,167 15,910 15,586
Operating Profit before
interest and taxation
- Continuing 900 1,091 1,363 1,089 2,263 2,180
Net interest (74) (165)
Group profit before taxation 2,189 2,015
3. Taxation
The charge for taxation on the profit for the year is made up as follows:
2003 2002
#' 000 #' 000
Current year
UK Corporation tax 229 154
Overseas taxation 638 587
Deferred taxation 11 14
878 755
4. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on the
profit on ordinary activities after taxation using as a divisor the weighted
average number of Ordinary Shares in issue during the year. For 2003 and 2002
the actual number of Ordinary Shares in issue throughout the year was
17,999,162.
A reconciliation of the earnings used in the calculations is set out
below:
2003 2002
#'000 p per share #'000 p per share
Basic earnings per share 1,311 7.3 1,260 7.0
Goodwill amortisation 302 1.7 302 1.7
Earnings per share before goodwill
amortisation 1,613 9.0 1,562 8.7
Earnings per share before goodwill amortisation has been shown because,
in the opinion of the directors, it reflects the underlying performance of the
group.
5. The final dividend will be paid on 12th February 2004 to shareholders
on the register at close of business on 10th December 2003.
6. Copies of the Report and Accounts will be despatched to shareholders
during the week commencing 5th January 2004 and will also be available from the
Company Secretary, Gooch & Housego PLC, The Old Magistrates Court, Ilminster,
Somerset. TA19 0AB.
This information is provided by RNS
The company news service from the London Stock Exchange
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