TIDMGHH
RNS Number : 4719U
Gooch & Housego PLC
03 December 2013
For immediate release 3 December 2013
Gooch & Housego PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2013
Gooch & Housego PLC ("Gooch & Housego", or "G&H", or
the "Company", or the "Group"), the specialist manufacturer of
optical components and systems, today announces its preliminary
results for the year ended 30 September 2013.
Financial Highlights
Year ended 30 September 2013 2012 change
------------------------- ----- ------ -------
Revenue (GBPm) 63.3 60.9 3.9%
------------------------- ----- ------ -------
Adjusted profit before
tax (GBPm)* 9.7 8.2 18.3%
------------------------- ----- ------ -------
Adjusted basic earnings
per share (pence)* 32.0 28.2 13.5%
------------------------- ----- ------ -------
Total dividend per
share (pence) 6.3 5.2 21.2%
------------------------- ----- ------ -------
Net cash/(debt) (GBPm) 5.7 (0.3) 6.0
------------------------- ----- ------ -------
Statutory profit before
tax (GBPm) 8.3 7.1 16.9%
------------------------- ----- ------ -------
Basic earnings per
share (pence) 27.7 24.4 13.5%
------------------------- ----- ------ -------
*adjusted figures are stated after excluding the amortisation of
acquired intangible assets and exceptional items being acquisition
costs and restructuring costs.
Operating & Strategic Highlights
-- Efficiency and volume drive margin improvement from 13.5% to 15.3%
-- Strong cash performance results in net cash position at year end
-- 21% growth in the full year dividend reflecting the strength of the balance sheet
-- Systems Technology Group established to accelerate transition
from components supplier to solutions provider
-- Post period end: -
o Acquisition of Spanoptic opens up new opportunities in
Aerospace & Defence and brings supply chain and manufacturing
partner in China
o Acquisition of Constelex strengthens STG team and brings
satellite communications expertise
-- Increased geographical footprint established across the Far East
Gareth Jones, CEO commented
"Gooch & Housego has made considerable progress in line with
its strategic objectives to yield a better balanced business with
enhanced growth potential in diversified markets.
With excellent customer relationships and a strong pipeline of
new products the Company is well-positioned to deliver sustained
growth and continued margin improvement."
For further information please contact:
Gooch & Housego Gareth Jones /
PLC Andrew Boteler 01460 256 440
Tim Thompson /
Buchanan Gabriella Clinkard 020 7466 5000
Investec Bank
plc (Nomad & Broker) Patrick Robb 020 7597 5970
Expected Financial Calendar
Annual General Meeting 26 February 2014
Final dividend for the 28 February 2014
year ended 30 September
2013 payable to shareholders
on the register at close
of business on 7 February
2014. Subject to approval
by shareholders at the
Annual General Meeting
Interim Results announced June 2014
Financial Year End 30 September 2014
Preliminary announcement December 2014
of results for
the year ending 30 September
2014
Chairman's Statement
"Our consistent strategy of diversifying the company's product
range & customer base has been successful in the year"
I am pleased to report that your company made good strategic
progress in the last twelve months on many fronts, against a
challenging market backdrop.
While revenues showed some growth in the year, adjusted profit
before tax was 18.3% higher due to increased volumes and efficiency
savings. This was achieved despite an increase in our investment in
research and development. Cash management remains a focus for the
Group and at the year-end we were in a net cash position. Following
two acquisitions since the year end, this has moved to a very
manageable modest debt.
The Board's responsibilities include ensuring that; Gooch &
Housego has a robust and achievable strategy, investments are made
without undue risks, we have the resources to achieve our
objectives and that the Company operates efficiently. Our
consistent strategy of diversifying the Company's product range and
customer base was effective in the year with the establishment of
our new Systems Technology Group and the subsequent award of a
number of early stage development contracts in the Space sector. It
is expected that these activities will lead to business growth as
the products progress from the development phase and enter
production in the medium term. These contracts will assist in the
business moving up the value chain into subsystems in line with our
strategic objectives. Gooch & Housego's risks in this new
sector are also minimised as these new product developments are
mostly externally funded.
We continued to assess ways of improving the efficiency and the
effectiveness of the business and management changes and
organisational improvements were made this year to the marketing
and sales activities of the group. We are further exploring if
efficiency would benefit from a reduction in the number of sites in
the US by consolidating capabilities. Progress was also made in
sharing technology between operations, whilst recognising national
security constraints. In manufacturing, plans were made to increase
the use of our partner company in the Czech Republic where labour
costs are significantly lower, whilst maintaining product
quality.
The global environment in which we enter our new financial year
remains unclear. In the US, budget uncertainties continue to cloud
our vision and the reduction in Government spending could limit our
opportunities in Aerospace and Defence. It is however important to
note Gooch & Housego's technology has the advantage of being
relevant in areas where expenditure is likely to be least affected.
In the Far East and Europe, some improvement in the economic
situation is evident which we expect to benefit the Company in due
course.
Finally, on behalf of the Board, I would like to thank all
employees for their efforts and contribution during the year to the
success of the Company. With their support, the Board believes the
company is well placed to continue its growth into the future.
Dr Julian Blogh
CEO Review
"Despite what at times have been challenging market conditions,
Gooch & Housego has traded well, whilst investing in
initiatives that underpin long term growth"
Trading conditions during the year were broadly positive, albeit
set against a background of some uncertainty affecting most of the
sectors in which Gooch & Housego operates. Order intake was at
the level needed to sustain growth in the business. The order book
ended the year at GBP27.8 million, an increase of 12% from the
beginning of the year.
Gooch & Housego has seen continued growth in its Aerospace
and Defence business despite the headwinds affecting this sector.
While some significant programmes stalled or were subject to
delays, other more mature programmes proceeded as planned and
outweighed the setbacks. While this market continues to be
challenging, the Company remains optimistic about continued growth
prospects based on the strong customer relationships that have been
developed in recent years and the breadth of opportunities
currently being addressed.
In line with its strategy, the Company has continued to
diversify its activities in the Industrial sector, with sensors and
test and measurement systems growing in importance over the past
year. In the industrial laser market Gooch & Housego has kept
pace with the technology shift away from solid state lasers in
favour of fibre lasers for many routine materials processing
applications. The Company is now a major supplier to the fibre
laser market at both component and subsystem level.
In Life Sciences, the Company began to utilise its Systems
Technology Group (STG), established mid-way through the year, to
leverage Gooch & Housego's excellence in components to develop
subsystems-level products to address new opportunities in laser
surgery and to build upon its already strong presence in Optical
Coherence Tomography (OCT). These initiatives, combined with
established business in microscopy and research and development
work in diagnostics, have reinforced Life Sciences as one of the
Company's main growth markets.
Creating the means to deliver growth has been a primary
objective during the past year. The aim has been to build a
broadly-based business that can deliver sustainable growth in flat
economic conditions and is able to respond to economic recovery,
while being sufficiently well-balanced to minimise the effects of
market cyclicality. We have sought to deliver growth in a number of
ways:
-- Via organic growth and new product development
-- By moving up the value-chain from components to subsystems
-- By developing new application areas where Gooch & Housego
can take a market leading position
-- Through acquisitions, where they accelerate the delivery of our strategic objectives
-- By leveraging our supply chain and low-cost manufacturing
relationships to increase competitiveness
-- By strengthening our presence in geographical markets with significant growth potential
Organic New Product Development
A more focused approach to research & development has paid
dividends in 2013, with a significant number of new products being
brought to market. These new products have ranged from
acousto-optic, electro-optic and fibre optic devices, to
sophisticated laser sources and optical amplifiers, spanning a
broad range of application areas ranging from microelectronics to
satellite communications. By carefully selecting our projects,
based on enhanced market intelligence derived from increasingly
close relationships with our major customers, we have been able to
increase the success rate and value of the new products we have
developed.
Organic Growth - Moving up the Value Chain
The Systems Technology Group (STG) was established to drive
organic growth at the subsystems level. Recognising that it is
difficult to make the transition from components to systems, and
inefficient to try to do this at multiple locations, the STG
provides Gooch & Housego with a vehicle to undertake the
development of complex photonic sub-systems without the constraints
that apply to its component manufacturing operations. With optical,
mechanical, electronic and software design and modelling
capabilities, and the ability to integrate multiple photonic
component technologies (for example, fibre optics, semiconductor
lasers and acousto-optics), each of which may be manufactured at a
different Gooch & Housego facility, the STG is able to lead and
coordinate complex projects with commercial customers, space
agencies and collaborative partners. Although still a small team
(seven people at the year-end), the STG is expected to double in
headcount during 2014. The STG is also able to call upon
development and engineering resources from across Gooch &
Housego, and works with outside partners and consultants, with the
result that it is able to take on more demanding projects than its
small size would suggest.
The STG has initially focussed on space photonics and optical
coherence tomography (OCT). In both applications G&H is
experiencing customer pull to supply "black-box" solutions, rather
than low-level components. In these new markets G&H's customers
tend to be very large organisations that perform the role of
systems integrator, and they are not well-equipped to interact at
the component level.
In space applications, photonics technology has significant
advantages over the equivalent electronic systems that are the norm
today (specifically lower mass, higher bandwidth and reduced power
consumption, all of which contribute to lower cost). A major
technology shift in favour of photonics technology is taking place
and represents an opportunity for Gooch & Housego to take a
leading position in this rapidly developing new market. Gooch &
Housego has a strong heritage in space qualified photonic
components and the objective is to leverage this to develop a
family of subsystems for applications in telecommunications and
earth observation satellites. Once proven in satellite applications
it is anticipated that this technology with filter down to the much
larger commercial and military aerospace markets. (G&H has
already participated in several collaborative projects with
aerospace partners to investigate the application of fibre optic
networks for data, sensing and control systems in next generation
aircraft.) The STG has successfully bid for a number of European
Space Agency (ESA) and European Union Framework 7 (EU FP7)
collaborative programmes and has recently completed a programme to
design and demonstrate a fibre optic amplifier suitable for use in
a satellite laser communications system.
Acquisitive Growth
Shortly after the year end Gooch & Housego completed the
acquisition of Spanoptic Limited ("Spanoptic"), a manufacturer of
precision optical components based in Glenrothes, Scotland.
Spanoptic specialises in spherical and aspheric lenses and
diffractive optics for applications in the ultraviolet, visible and
infrared regions of the spectrum. This capability is highly
complementary to Gooch & Housego's predominantly planar optics
business and enhances the Company's ability to provide complete
subsystem solutions to its customers in line with its strategic
objectives. Spanoptic's capabilities in infrared optics and
coatings are particularly relevant to Gooch & Housego's
activities in the Aerospace and Defence sector.
In recent years Spanoptic has invested heavily in
state-of-the-art optical manufacturing, metrology and thin-film
coating equipment. These investments have enabled Spanoptic to
produce optical components at the upper end of the quality and
precision scale while maintaining highly competitive pricing. As a
result, Spanoptic has been able to win business and develop strong,
mainly European customer relationships across a broad range of
applications including analytical instrumentation, optical sensing,
security, imaging, life sciences and aerospace and defence.
Also following the year end, in late November 2013 Gooch &
Housego, also completed the acquisition of Constelex Technology
Enablers Limited (Constelex), a small Athens, Greece, based
business specialising in the design and manufacture of low-noise,
high power optical fibre amplifiers and lasers for applications in
telecommunications, sensing and defence. The Constelex team will
relocate to the UK in early 2014 and will be based at Gooch &
Housego's Torquay facility as part of the STG. Constelex brings
highly relevant optical systems expertise to the STG plus a number
of ESA and EU funded collaborative projects in the space photonics
field. The acquisition of Constelex will add valuable skills and
experience to the STG and will help to accelerate the delivery of
the Company's strategic objective of becoming a leader in space
photonics.
Increasing Competitiveness
Spanoptic's competitive advantage is further enhanced by the
strategic alliance that it has with a Chinese manufacturer of
precision optics, optical sub-systems and instrumentation. This
alliance is being developed and extended to provide Gooch &
Housego with an enhanced foothold in the increasingly important
Chinese market and to serve as a high-quality, low-cost
manufacturing partner for both components and systems. With the
ability to manufacture photonic sub-systems and instrumentation in
higher volumes and at lower cost than would be possible elsewhere
within Gooch & Housego this relationship will enable the
Company to scale to higher volumes than would otherwise have been
possible.
Similarly, we have made greater use of our established European
contract manufacturing partner based in the Czech Republic to
enhance the competitiveness of our products, a process that will
continue in the current year.
Strengthening our Presence in Geographical Markets with
Significant Growth Potential
2013 has seen a number of initiatives to increase our
penetration of Far Eastern markets. Over the past 25 years Gooch
& Housego has grown its business in Japan with the assistance
of its distribution partners. In order to gain access to new
opportunities and to demonstrate commitment to this important
market Gooch & Housego Japan KK was established and an office
opened in Nagoya in April 2013. A number of significant new
opportunities are already under development. . In addition to the
new relationships in China that came with the acquisition of
Spanoptic, we have strengthened our applications engineering team
there and opened a sales office in Singapore during 2013.
Summary
During 2013, G&H has made considerable progress in line with
its strategic objectives to yield a better balanced business with
enhanced growth potential.
G&H has become a more vertically integrated business. At the
component end of the scale, the acquisition of Spanoptic has added
highly complementary capabilities in precision optics. The STG has
given G&H a vehicle with which to provide its customers with
sub-systems design and development services, and the acquisition of
Constelex has enhanced the ability of the STG to develop complex
systems for space and telecommunications applications.
Greater efficiency and volume has helped to deliver revenue
growth at improved margins, resulting in strong cash generation and
a net cash position at the year end.
Prospects
G&H has taken a number of important initiatives in the past
year - a re-focussing of Research & Development and Sales &
Marketing, the creation of the STG and the identification of new
markets such as space photonics. When combined with the
acquisitions of Spanoptic and Constelex, these initiatives provide
G&H with the means to deliver growth in a flat economy, and the
ability to respond to, and benefit from, market recovery.
With excellent customer relationships and a strong pipeline of
new products G&H is well-positioned to deliver sustained growth
and continued margin improvement.
Gareth Jones
Performance Overview
FINANCIAL PERFORMANCE
The business has delivered profitable growth and improving
margins whilst experiencing variable demand patterns within our
core markets. The trend towards a more evenly balanced business has
continued, reflecting our strategy of diversification and our
efforts to develop new opportunities in Aerospace and Defence and
Life Sciences.
Following a steady first half, the second half of this financial
year experienced strong sales into many of our market sectors. It
is particularly pleasing to report sales growth of 16.3%, in
aggregate, in our key target markets of Aerospace & Defence and
Life Sciences. These markets now account for 38.9% of Gooch &
Housego's total revenue.
In the financial year under review, margins benefited from the
greater operating leverage gained from increased volumes and from
efficiency gains made by the business this year. As a result
adjusted operating margins have increased to 16.2% (2012:
14.7%).
REVENUE
Year ended 30 2013 2012
September
---------------- ----------------
GBP000 % of GBP000 % of
total total
--------------------- ------- ------- ------- -------
Industrial 34,345 54% 35,789 59%
Aerospace and
Defence 17,273 27% 15,440 25%
--------------------- ------- ------- ------- -------
Life Sciences 7,353 12% 5,731 10%
--------------------- ------- ------- ------- -------
Scientific Research 4,281 7% 3,891 6%
--------------------- ------- ------- ------- -------
Group Revenue 63,252 100% 60,851 100%
--------------------- ------- ------- ------- -------
Group revenue for the year was a record GBP63.3m, an increase of
GBP2.4m, or 4% over the previous year of GBP60.9m. On a consistent
currency basis revenue was 3% higher than the previous year.
In our Aerospace & Defence business segment revenue grew by
11.9% from GBP15.4m last year to GBP17.3m this year. Similarly
revenue in our Life Sciences business grew by 28.3%, from GBP5.7m
to GBP7.4m. Sales into our industrial market fell by 4.0% this year
on the back of weaker business in our telecommunications and
traditional Q-switch markets.
A more detailed analysis of revenues by market was shown in the
Market Analysis section, later in this report.
GROUP EARNINGS PERFORMANCE
All amounts in Adjusted Reported
GBP'000
------------------
Year ended 30 2013 2012 2013 2012
September
------------------- -------- -------- -------- --------
Operating profit 10,268 8,973 8,951 7,852
------------------- -------- -------- -------- --------
Net finance costs (608) (776) (608) (776)
------------------- -------- -------- -------- --------
Profit before
taxation 9,660 8,197 8,343 7,076
------------------- -------- -------- -------- --------
Taxation (2,490) (2,032) (2,151) (1,753)
------------------- -------- -------- -------- --------
Profit for the
period 7,170 6,165 6,192 5,323
Basic earnings
per share (p) 32.0p 28.2p 27.7p 24.4p
------------------- -------- -------- -------- --------
The Group adjusted profit before tax amounted to GBP9.7m (2012:
GBP8.2m) and represented a return on sales of 15.3% compared with
13.5% in the previous year. Statutory profit before tax was GBP8.3m
compared with GBP7.1m last year.
The effective rate of tax was 25.8% (2012: 24.8%), reflecting a
combination of the varying tax rates applicable throughout the
countries in which the Group operates, principally the UK and the
USA. The introduction of the patent box tax rate from April 2013
has not contributed to a lower tax rate in 2013 and will not in
2014. The effective rate of tax should benefit in the future from
further reductions in the UK tax rate.
Adjusted earnings per share (EPS) increased from 28.2p to 32.0p.
Basic EPS was 27.7p compared with 24.4p last year.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating Net finance Taxation Earnings
Profit costs per share
--------------- ------------------ ------------------ ------------------ ----------------
Year ended 2013 2012 2013 2012 2013 2012 2013 2012
30 September GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence
--------------- -------- -------- -------- -------- -------- -------- ------- -------
Reported 8,951 7,852 (608) (776) (2,151) (1,753) 27.7p 24.4p
--------------- -------- -------- -------- -------- -------- -------- ------- -------
Amortisation
of acquired
intangible
assets 875 881 - - (225) (219) 2.9p 3.0p
--------------- -------- -------- -------- -------- -------- -------- ------- -------
Acquisition
costs 164 - - - (42) - 0.5p -
--------------- -------- -------- -------- -------- -------- -------- ------- -------
Restructuring
costs 278 240 - - (72) (60) 0.9p 0.8p
--------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted 10,268 8,973 (608) (776) (2,490) (2,032) 32.0p 28.2p
--------------- -------- -------- -------- -------- -------- -------- ------- -------
NON GAAP MEASURES
The Company uses a number of non GAAP measures which are shown
in the table above and in the segmental analysis. These measures
are used to illustrate the impact of non-recurring and non-trading
items on the Company's financial results. These are the impact of
the amortisation of acquired intangible assets, acquisition costs
and costs associated with restructuring activities In addition, the
Company uses the term EBITDA (Earnings before interest, taxation,
depreciation and amortisation). This is a commonly used measure of
operating performance and cash flow.
SEGMENTAL ANALYSIS
Industrial
Our Industrial business fell marginally during the year, with
revenues of GBP34.3m, compared with GBP35.8m last year. Revenue
from the Group's traditional Q-switch product fell during the year,
as anticipated, and now represents 12.2% of total group revenues.
We believe this reflects the continuing shift towards the use of
fibre lasers in materials processing applications. This appears to
be supported by the significant increase in sales of fibre laser
components experienced by G&H in 2013. Telecommunications
revenues were down in 2013 following the completion of the London
Olympics, a one off benefit experienced in 2012 and the continuing
softness in the undersea components business.
Operating profit for the Industrial sector as a whole was 6.8%
higher at GBP7.0m, compared with GBP6.6m last year. This reflects a
combination of cost-saving initiatives and a better performance
from our Palo Alto facility, being offset to some extent by a
poorer product mix.
Aerospace & Defence (A&D)
Our A&D business revenue increased by 11.9% from GBP15.4m to
GBP17.3m in 2103. Despite a significant reduction in engineering
contracts, which were affected by US Government sequestration
issues, the business was able to deliver considerable growth in
this market sector. This was driven through the provision of both
components and systems to our UK and US A&D customers.
Operating margins in this sector were marginally down in percentage
terms, but increased absolutely. This reflected the combination of
mix and volume this year.
Life Sciences
Gooch & Housego grew its presence in the Life Sciences
sector in 2013 with revenues of GBP7.4m (2012: GBP5.7m). The growth
in this market was driven by the Optical Coherence Tomography (OCT)
and Microscopy markets. Operating margins in this sector were
marginally down in percentage terms, but increased absolutely. This
was mainly a reflection of the business having to absorb a larger
share of Group costs.
Scientific Research
Our activities in the Scientific Research market are dominated
by a small number of large, long-term programmes. This market saw
growth in 2013 on the back of increased business from laser fusion
projects. These programmes are now largely complete, although we do
expect on-going business to service replacement and maintenance
requirements.
RESEARCH & DEVELOPMENT (R&D)
Gooch & Housego continues to invest in R&D in all areas
of the business and regards this as fundamental to the continued
growth of the company. There were a large number of product
releases in 2013 and there is an extensive new product pipeline
with a number of new product introductions anticipated in the 2014
financial year.
Expenditure on R&D in the year to 30 September 2013
increased by 15% from GBP4.3m to GBP4.9m. A proportion of this
increase was funded through UK Government and European grant
funding. R&D expenditure represented 7.8% of revenue (2012:
7.0%). In addition the Group capitalised GBP0.03m (2012: GBP0.01m)
of R&D expenditure.
BALANCE SHEET
The Group's shareholder's funds at the end of the year were
GBP64.9m, an increase of GBP6.4m over the prior year. This increase
mainly comprised GBP1.1m from share capital / premium and GBP5.5m
from retained earnings.
Additions to tangible fixed assets totalled GBP2.5m. The main
fixed asset additions were in response to the increase in aerospace
and defence business, where a further GBP1.0m has been invested in
extending coating and precision optics capabilities. GBP0.5m has
also been invested in expanding our Torquay facilities and
equipment in the establishment of the Systems Technology Group into
this site.
Working capital was 24.7% of revenue in the current year
compared to 21.3% in 2012. Inventories have increased by GBP0.6m
from GBP12.8m in 2012 to GBP13.4m at this year-end. This has been
driven by the necessity to hold safety stocks for our A&D
customers. Since the half-year the business has worked on
initiatives to reduce inventory. This has resulted in inventory
carrying values reducing by GBP0.8m from GBP14.2m as at 31 March
2013. Trade debtors increased from GBP9.2m to GBP10.2m following a
strong final quarter revenue performance.
Cash balances at 30 September 2013 were GBP14.6m, compared with
GBP11.7m at 30 September 2012. Net cash flows from operating
activities generated GBP9.2m, compared with GBP8.9m last year.
During the year the business moved from a net debt position of
GBP0.3m as at 30 September 2102, to a net cash position of
GBP5.7m.
MOVEMENT IN NET (DEBT)/FUNDS
All amounts in GBPm Net
Gross Gross (Debt)
Funds Debt /Funds
--------------------------- ------- ------- --------
At 1 October 2012 11.7 (12.0) (0.3)
Operating cash flows 12.4 - 12.4
Debt repayment (3.4) 3.4 -
Capital expenditure (2.2) - (2.2)
Working capital (2.2) - (2.2)
Proceeds from share issue 1.0 - 1.0
Interest, tax & dividends (2.6) - (2.6)
Exchange movement (0.1) (0.3) (0.4)
--------------------------- ------- ------- --------
At 30 September 2013 14.6 (8.9) 5.7
--------------------------- ------- ------- --------
ORDER BOOK
As at 30 September 2013, the Group order book stood at GBP27.8m,
compared to GBP24.9m at the end of the 2012 financial year, a 12%
increase. On a like for like basis, excluding the impact of foreign
exchange, the order book was 12% higher. Book to bill ratios for
the business as a whole were 0.98 times (six month rolling average)
as at 30 September 2013, compared to 1.01 times for the same period
last year.
STAFF
The Group workforce reduced slightly from 588 at 30 September
2012 to 581 at the end of September 2013, a fall of 7. This is a
net position and therefore reflects both the reductions in staffing
resulting from the work the business has done in integration and
rationalisation of sites and processes and the additional
investment that the business has made in engineering, business
development and senior management. During the year the Group
appointed Jon Fowler as EVP Commercial Development. Mr Fowler was
an internal appointment having previously held a general management
role in our US operations. Mr Fowler brings a wealth of customer
development experience to this role.
POST BALANCE SHEET EVENTS
On the 15 October 2013 Gooch & Housego announced that it has
completed the acquisition of Spanoptic Limited ("Spanoptic"), a
manufacturer of precision optical components, based in Glenrothes,
Scotland,
Founded in 1976, Spanoptic currently employs 62 people and in
the year ended 31 December 2012 had revenues of GBP7.7 million and
made a profit before tax of GBP1.0 million. Spanoptic had net
assets of GBP5.5 million at acquisition, including net cash of
GBP0.7 million. The gross cash consideration paid by Gooch &
Housego was GBP6.6 million, funded from existing cash and debt
facilities.
Spanoptic will continue to operate from its Glenrothes factory
as an integrated part of Gooch & Housego's UK precision optics
business. As a long-term supplier to G&H (Gooch & Housego
accounted for approximately 1.5% of Spanoptic's turnover in the
year to 31 December 2012), Spanoptic is well-known to the Gooch
& Housego management team and has been the subject of regular
quality and process audits in recent years.
On the 25 November 2013 Gooch & Housego announced that it
had completed the acquisition of Constelex Technology Enablers
Limited (Constelex), an Athens, Greece, based designer and
manufacturer of advanced photonic systems.
Constelex is a small, start-up company specialising in low-noise
optical fibre amplifiers. With a mission to become a world-leading
design-house and solution provider for photonic systems with
applications in telecommunications, space, defence and life
sciences, Constelex has built up a strong reputation for technical
excellence since it was founded in 2009. As a result, Constelex has
enjoyed considerable success in securing contracts from the
European Space Agency and attracting funding from the European
Union to develop complex photonic systems for predominantly space
and satellite applications.
DIVIDENDS
The Directors propose a final dividend of 4.0p per share making
a total dividend for the year of 6.3p (2012: 5.2p). The final
dividend will be payable on 28 February 2014 to shareholders on the
Company's share register as at close of business on 7 February
2014.
KEY PERFORMANCE INDICATORS (KPIs)
The Company's objective is to deliver sustainable, long-term
growth in revenue and profits. This is to be achieved through the
execution of the Board's strategies of market diversification, the
continued investment in R&D to support organic growth, the
acquisition of strategically complementary businesses and the
on-going drive to move up the value chain.
In striving to achieve these strategic objectives, the main
financial performance measures monitored by the Board are:
Total revenue growth 2013 2012 2011
---------------------- ----- ----- -----
At actual exchange
rates 4% 0% 37%
---------------------- ----- ----- -----
At constant exchange
rates 3% (1%) 40%
---------------------- ----- ----- -----
The Board is focused on delivering revenue growth by investing
both organically and through acquisitions. The Group business has
delivered underlying growth, whilst experiencing variable demand
patterns within its core markets.
Target market revenue 2013 2012 2011
----------------------- ----- ----- -----
Aerospace & Defence
(GBPm) 17.3 15.4 15.4
----------------------- ----- ----- -----
Life Sciences (GBPm) 7.4 5.7 5.7
----------------------- ----- ----- -----
The Company's target markets of Aerospace and Defence and Life
Science provide a route to sustainable growth, and a more
diversified revenue base. These markets also provided significant
opportunities for Gooch & Housego to migrate up the value-chain
from materials and components to higher value sub-assemblies,
modules and systems in response to the trend for our larger
customers to outsource increasingly complex parts of their
business. The business has made good progress in addressing its
target markets of Aerospace and Defence and Life Sciences which, in
aggregate, have increased by 16.3% in the 2013 financial year.
Net cash analysis 2013 2012 2011
------------------------ ----- ------ ------
Net cash/(debt) (GBPm) 5.7 (0.3) (1.8)
------------------------ ----- ------ ------
In order to balance business risk with the investment needs of
the Company, Gooch & Housego closely monitors and manages its
net debt. This year the business moved from a net debt position of
GBP0.3m as at 30 September 2102, to a net cash position of GBP5.7m,
putting the business in a strong position both in terms of headroom
for further investment and from the perspective of managing its
business risk.
Earnings per share 2013 2012 2011
(EPS)
---------------------- ----- ----- -----
Adjusted diluted EPS
(pence) 30.5 26.4 36.0
---------------------- ----- ----- -----
As a result of a strong trading performance, the business has
been able to deliver growth in adjusted diluted EPS of 15.5%, from
26.4p to 30.5p in 2013.
Group Income Statement
For the year ended 30 September 2013 (unaudited)
Note 2013 2012
GBP000 GBP000
--------- ---------
Revenue 2 63,252 60,851
Cost of revenue (37,635) (37,405)
--------- ---------
Gross profit 25,617 23,446
Research & Development (4,913) (4,277)
Sales & Marketing (4,666) (4,119)
Administration (8,814) (8,181)
Other income 1,727 983
--------- ---------
Operating profit 2 8,951 7,852
Finance income 15 24
Finance costs (623) (800)
--------- ---------
Profit before income tax
expense 8,343 7,076
Income tax expense 3 (2,151) (1,753)
--------- ---------
Profit for the year 6,192 5,323
--------- ---------
Basic earnings per share 4 27.7p 24.4p
--------- ---------
Diluted earnings per share 4 26.4p 22.8p
--------- ---------
Reconciliation of operating profit to adjusted operating
profit:
2013 2012
GBP000 GBP000
------- --------
Operating profit 8,951 7,852
Amortisation of acquired
intangible assets 875 881
Acquisition costs 164 -
Restructuring costs 278 240
------- --------
Adjusted operating
profit 10,268 8,973
------- --------
Group Balance Sheet
As at 30 September 2013 (unaudited)
2013 2012
GBP000 GBP000
--------- ---------
Non-current assets
Property, plant & equipment 21,456 21,405
Intangible assets 19,821 20,720
Deferred income tax assets 3,830 4,308
--------- ---------
45,107 46,433
Current assets
Inventories 13,390 12,802
Income tax assets 420 -
Trade and other receivables 12,706 11,062
Cash and cash equivalents 14,558 11,712
41,074 35,576
Current liabilities
Trade and other payables (10,461) (10,202)
Borrowings (5,726) (5,774)
Income tax liabilities (307) (17)
Provision for other liabilities
and charges (271) (357)
--------- ---------
(16,765) (16,350)
Net current assets 24,309 19,226
--------- ---------
Non-current liabilities
Borrowings (3,113) (6,261)
Deferred income tax liabilities (1,330) (698)
Derivative financial instruments (34) (134)
--------- ---------
(4,477) (7,093)
Net assets 64,939 58,566
--------- ---------
Shareholders' equity
Called up share capital 4,620 4,382
Share premium account 15,213 14,311
Merger reserve 2,671 2,671
Hedging reserve (79) (169)
Cumulative translation
reserve (859) (496)
Retained earnings 43,373 37,867
--------- ---------
Equity Shareholders' Funds 64,939 58,566
--------- ---------
Group Statement of Changes in Shareholders' Equity
For the year ended 30 September 2013 (unaudited)
Share Share
capital premium Merger Hedging Retained Total
account account reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- --------- ---------- ----------- ---------
At 1 October
2011 4,370 14,200 2,671 (264) 33,123 54,100
Profit for
the financial
year - - - - 5,323 5,323
Other comprehensive
income for
the year - - - 95 (1,084) (989)
--------- --------- --------- ---------- ----------- ---------
Total comprehensive
income for
the year - - - 95 4,239 4,334
--------- --------- --------- ---------- ----------- ---------
Dividends - - - - (1,093) (1,093)
Proceeds from
shares issued 12 111 - - - 123
Fair value
of employee
services - - - - 471 471
Tax credit
relating to
share option
schemes - - - - 631 631
Total contributions
by and distributions
to owners
of the parent
recognised
directly in
equity 12 111 - - 9 132
At 30 September
2012 4,382 14,311 2,671 (169) 37,371 58,566
At 1 October
2012 4,382 14,311 2,671 (169) 37,371 58,566
Profit for
the financial
year - - - - 6,192 6,192
Other comprehensive
income for
the year - - - 90 (364) (274)
--------- --------- --------- ---------- ----------- ---------
Total comprehensive
income for
the year - - - 90 5,828 5,918
--------- --------- --------- ---------- ----------- ---------
Dividends - - - - (1,229) (1,229)
Proceeds from
shares issued 238 902 - - (96) 1,044
Fair value
of employee
services - - - - 341 341
Tax credit
relating to
share option
schemes - - - - 299 299
Total contributions
by and distributions
to owners
of the parent
recognised
directly in
equity 238 902 - - (685) 455
--------- --------- --------- ---------- ----------- ---------
At 30 September
2013 4,620 15,213 2,671 (79) 42,514 64,939
--------- --------- --------- ---------- ----------- ---------
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2013 (unaudited)
2013 2012
GBP000 GBP000
------- ---------
Profit for the period 6,192 5,323
Other comprehensive income
- items that may be reclassified
subsequently to profit or
loss
Movement in the value of
derivative financial instruments 90 95
Currency translation differences (364) (1,084)
Other comprehensive (expense)
for the period net of tax (274) (989)
Total comprehensive income
for the period 5,918 4,334
------- ---------
Total comprehensive income
for the period is attributed
to:
Shareholders of Gooch &
Housego PLC 5,918 4,334
------- ---------
Group Cash Flow Statement
For the year ended 30 September 2013 (unaudited)
Note 2013 2012
GBP000 GBP000
-------- --------
Cash flows from operating
activities
Cash generated from operations 6 10,130 10,653
Income tax payments (882) (1,793)
-------- --------
Net cash generated from
operating activities 9,248 8,860
-------- --------
Cash flows from investing
activities
Acquisition of subsidiaries,
net of cash acquired (22) (2,061)
Purchase of property, plant
and equipment (2,032) (3,337)
Disposal of property, plant
and equipment 67 59
Purchase of intangible
assets (202) (405)
Interest received 15 24
-------- --------
Net cash used in investing
activities (2,174) (5,720)
-------- --------
Cash flows from financing
activities
Repayment of borrowings (3,394) (3,397)
Proceeds from issuance
of share capital 1,044 123
Dividends paid to ordinary
shareholders (1,229) (1,093)
Interest paid (505) (711)
Net cash used in financing
activities (4,084) (5,078)
-------- --------
Net increase / (decrease)
in cash, cash equivalents,
working capital facility
and bank overdraft 2,990 (1,938)
Cash, cash equivalents,
working capital facility
and bank overdraft at beginning
of the period 9,235 11,276
Exchange losses on cash
and bank overdraft (137) (103)
-------- --------
Cash, cash equivalents,
working capital facility
and bank overdraft at the
end of the period 12,088 9,235
-------- --------
Cash, cash equivalents, working capital facility and bank
overdrafts at the end of the period comprise:
2013 2012
GBP000 GBP000
-------- --------
Cash and cash equivalents 14,558 11,712
Bank borrowings and overdraft (2,470) (2,477)
-------- --------
Cash, cash equivalents,
working capital facility
and bank overdraft at the
end of the period 12,088 9,235
-------- --------
Notes to the Preliminary Report
1 Basis of Preparation
The unaudited Preliminary Report has been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and interpretations in issue at 30 September 2013.
The Preliminary Report was approved by the Board of Directors
and the Audit Committee on 27 November 2013. The Preliminary Report
does not constitute statutory financial statements within the
meaning of section 434 of the Companies Act 2006 and has not been
audited.
Comparative figures in the Preliminary Report for the year ended
30 September 2012 have been taken from the Group's audited
statutory financial statements on which the Group's auditors,
PricewaterhouseCoopers LLP, expressed an unqualified opinion.
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 September 2012,
as described in those financial statements. New standards or
interpretations which came into effect for the current reporting
period did not have a material impact on the net assets or results
of the Group.
The Preliminary Report will be announced to all shareholders on
the London Stock Exchange and published on the Group's website on 3
December 2013. Copies will be available to members of the public
upon application to the Company Secretary at Dowlish Ford,
Ilminster, Somerset, TA19 0PF.
2. Segmental analysis
The business of the Company is divided into four market sectors,
being Aerospace and Defence, Life Sciences, Industrial and
Scientific Research, together with a Corporate cost center.
The Industrial business segment primarily comprises the
industrial laser market for use in the semiconductor and
microelectronic industries, but also includes other industrial
applications such as metrology and telecommunications. Scientific
Research covers academic and government funded research including
major multi-national projects.
For the year
ended
30 September Aerospace Life Scientific
2013 & Defence Sciences Industrial Research Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
Total revenue 17,273 7,353 38,179 4,281 - 67,086
Inter and intra-division - - (3,834) - - (3,834)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
External revenue 17,273 7,353 34,345 4,281 - 63,252
Divisional
expenses (14,335) (5,664) (26,425) (3,600) (1,285) (51,308)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
EBITDA(1) 2,938 1,689 7,920 681 (1,285) 11,943
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
EBITDA % 17.0% 23.0% 23.1% 15.9% 0.0% 18.9%
Depreciation
& amortisation (550) (220) (907) (143) (299) (2,117)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
Operating profit/(loss)
before amortisation
of acquired
intangible
assets 2,388 1,469 7,013 538 (1,582) 9,826
Acquired intangible
assets amortisation - - - - (875) (875)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
Operating profit/(loss) 2,388 1,469 7,013 538 (2,457) 8,951
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
Operating profit
margin % 13.8% 20.0% 20.4% 12.6% 0.0% 14.2%
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
2. Segmental analysis - continued
For the year
ended
30 September Aerospace Life Scientific
2012 & Defence Sciences Industrial Research Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
Total revenue 15,440 5,731 39,067 3,912 - 64,150
Inter and intra-division - - (3,278) (21) - (3,299)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
External revenue 15,440 5,731 35,789 3,891 - 60,851
Divisional
expenses (12,712) (4,283) (28,045) (3,571) (1,119) (49,730)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
EBITDA(1) 2,728 1,448 7,744 320 (1,119) 11,121
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
EBITDA % 17.7% 25.3% 21.6% 8.2% 0.0% 18.3%
Depreciation
& amortisation (548) (231) (1,177) (88) (344) (2,388)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
Operating profit/(loss)
before amortisation
of acquired
intangible
assets 2,180 1,217 6,567 232 (1,463) 8,733
Acquired intangible
assets amortisation - - - - (881) (881)
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
Operating profit/(loss) 2,180 1,217 6,567 232 (2,344) 7,852
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
Operating profit
margin % 14.1% 21.2% 18.3% 6.0% 0.0% 12.9%
-------------------------- ----------- ---------- ----------- ----------- ---------- ---------
(1)EBITDA = Earnings before interest, tax, depreciation and
amortisation
All of the amounts recorded are in respect of continuing
operations.
Analysis of revenue by destination and net assets by
origination:
for year ended 30 September
Revenue Net Assets
---------------- ----------------
2013 2012 2013 2012
GBP000 GBP000 GBP000 GBP000
------- ------- ------- -------
United Kingdom 9,481 8,644 26,840 20,660
North America 30,213 28,443 37,975 37,852
Continental
Europe 13,821 14,343 120 54
Asia Pacific
& Other 9,737 9,421 4 -
Total 63,252 60,851 64,939 58,566
------- ------- ------- -------
3. Income tax expense
The income tax expense for the year to 30 September 2013 is set
out below.
2013 2012
GBP000 GBP000
--------
Current taxation
UK Corporation tax 1,263 1,264
Overseas tax 238 491
Adjustments in respect
of prior year tax charge (304) (395)
-------- --------
Total current tax 1,197 1,360
Deferred tax
Origination and reversal
of temporary differences 1,099 32
Adjustments in respect
of prior year deferred
tax (188) 307
Impact of tax rate change
to 23% (2012: 23%) 43 54
--------
Total deferred tax 954 393
Total income tax expense
per income statement 2,151 1,753
-------- --------
4. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on
the profit for the period using the weighted average number of
Ordinary Shares in issue during the period as a divisor. The
weighted average number of shares for the year ending 30 September
is given below:
2013 2012
Number Number
Number of shares used for
basic earnings per share 22,376,650 21,860,241
Dilutive shares 1,097,927 1,531,993
Number of shares used for
dilutive earnings per share 23,474,577 23,392,234
----------- -----------
A reconciliation of the earnings used in the earnings per share
calculation is set out below:
2013 2012
pence
pence per
GBP000 per share GBP000 share
------- ----------- ------- -------
Basic earnings per
share 6,192 27.7 5,323 24.4p
Acquired intangible
assets amortisation
(net of tax) 650 2.9p 662 3.0p
Acquisition costs (net
of tax) 122 0.5p - -
Restructuring costs
(net of tax) 206 0.9p 180 0.8p
------- ----------- ------- -------
Total adjustments net
of income tax expense: 978 4.3p 842 3.8p
------- ----------- ------- -------
Adjusted basic earnings
per share 7,170 32.0p 6,165 28.2p
------- ----------- ------- -------
Diluted earnings per
share 6,192 26.4p 5,323 22.8p
------- ----------- ------- -------
Adjusted diluted earnings
per share 7,169 30.5p 6,165 26.4p
------- ----------- ------- -------
Basic and diluted earnings per share before amortisation and
adjustments have been shown because, in the opinion of the
Directors, it provides a useful measure of the trading performance
of the Group.
5. Dividend
2013 2012
GBP000 GBP000
-------- --------
Final 2012 dividend paid
in 2013: 3.2p per share.
(Final 2011 dividend paid
in 2012: 3.0p per share) 712 656
2013 Interim dividend paid:
2.3p per share (2012: 2.0p) 517 437
-------- --------
1,229 1,093
-------- --------
The Directors propose a final dividend of 4.0p per share making
the total dividend paid and proposed in respect of the 2013
financial year 6.3p (2012: 5.2p).
6. Cash generated from operating activities
2013 2012
GBP000 GBP000
-------- --------
Profit before income tax 8,343 7,076
Adjustments for:
- Amortisation of acquired
intangible assets 875 881
- Amortisation of other
intangible assets 168 296
- Depreciation 1,949 2,092
- Loss on disposal of property,
plant and equipment 91 48
- Share-based payment charges 341 471
- Finance income (15) (24)
- Finance costs 623 800
-------- --------
Total 4,032 4,564
Changes in working capital
- Increases in inventories (1,328) (1,465)
- (Increase)/decrease in
trade and other receivables (1,208) 1,351
- Decrease in trade and
other payables (538) (327)
- Increase/(decrease) in
provisions 829 (546)
-------- --------
Total (2,245) (987)
Cash generated from operating
activities 10,130 10,653
-------- --------
7. Events after the reporting date
The group acquired 100% of the share capital of Spanoptic
Limited a Glenrothes, Scotland, based manufacturer of precision
optical components for a gross consideration of GBP6.6m, funded
from existing cash and debt facilities on 15 October 2013.
On 26 November 2013 the group acquired 100% of the share capital
of Constelex Technology Enablers Limited, an Athens, Greece, based
designer and manufacturer of advanced photonic systems. The gross
consideration will be EUR650,000, comprising EUR400,000 in cash,
funded from existing cash and debt facilities, at completion,
followed by EUR250,000 in Gooch & Housego shares once
activities are relocated to the UK.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGGRPPUPWGCP
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