TIDMGHH
RNS Number : 1990J
Gooch & Housego PLC
10 June 2014
For immediate release 10 June 2014
GOOCH & HOUSEGO PLC
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2014
Gooch & Housego PLC (AIM:GHH), the specialist manufacturer
of optical components and systems, today announces its interim
results for the six months ended 31 March 2014.
Year ended 30 September HY2014 HY2013 Change FY2013
-------------------------- ------- ------- ------- -------
Revenue (GBPm) 34.4 29.0 18.6% 63.3
-------------------------- ------- ------- ------- -------
Adjusted profit before
tax (GBPm)(1) 5.1 3.8 34.2% 9.7
-------------------------- ------- ------- ------- -------
Adjusted basic earnings
per share (pence)(1) 15.9 12.7 25.2% 32.0
-------------------------- ------- ------- ------- -------
Interim dividend per
share (pence) 2.6 2.3 13.0% 6.3
-------------------------- ------- ------- ------- -------
Net cash (GBPm) 2.3 0.7 228.6% 5.7
-------------------------- ------- ------- ------- -------
Statutory profit before
tax (GBPm) 3.7 3.3 12.1% 8.3
-------------------------- ------- ------- ------- -------
Basic earnings per share
(pence) 11.0 11.2 (1.8%) 27.7
-------------------------- ------- ------- ------- -------
(1) Adjusted for amortisation of acquired intangible assets,
site closure costs, the impairment of goodwill and the gain on
bargain purchase in relation to Spanoptic Limited.
Operational highlights
-- Strong performance from Aerospace & Defence and Industrial divisions
-- Acquisition of Spanoptic in October 2013 adds complementary precision optics business
-- Acquisition of Constelex in November 2013 strengthens Systems Technology Group
-- Systems Technology Group successful in securing contracts and funded projects
-- Rationalisation of manufacturing and R&D sites initiated
-- Investment in R&D up 19%; 4 patents granted and 6 filed so far this year
-- Solid order book of GBP29.7 milion at the end of the period
-- Net cash of GBP2.3 million at period end after investing
GBP5.5 million (net) in acquisitions
Gareth Jones,Chief Executive of Gooch & Housego PLC,
commented on the results:
"Gooch & Housego's markets continue to exhibit attractive,
long-term structural growth drivers as photonic technology is
adopted across an increasingly wide range of application areas. We
continue to invest in our business with confidence to position it
for sustainable long-term growth."
For further information please contact:
Gareth Jones / Andrew
Gooch & Housego PLC Boteler 01460 256 440
Mark Court / Gabriella
Buchanan Clinkard 020 7466 5000
Investec Bank plc (Nomad Patrick Robb / David
& Broker) Anderson 020 7597 5169
Operating and Financial Review
Performance Overview
In the six months to 31 March 2014, the business has once again
delivered profitable growth and improving margins in less than
buoyant market conditions. The trend towards a more evenly balanced
business has continued, reflecting not only our strategy of
diversification and our efforts to develop new opportunities in
Aerospace & Defence and Life Sciences, but also our success in
growing the business in our "new industrial" markets.
REVENUE
Six months ended 2014 2013
31 March
----------------- -----------------
GBP'000 % of GBP'000 % of
total total
----------------------- -------- ------- -------- -------
Industrial 18,917 55% 16,404 56%
Aerospace and Defence 10,218 30% 7,437 26%
----------------------- -------- ------- -------- -------
Life Sciences 3,608 10% 3,142 11%
----------------------- -------- ------- -------- -------
Scientific Research 1,679 5% 2,006 7%
----------------------- -------- ------- -------- -------
Group Revenue 34,422 100% 28,989 100%
----------------------- -------- ------- -------- -------
Group revenue for the half year was a record GBP34.4 million, an
increase of GBP5.4 million, or 19% over the comparative period last
year. On a constant currency basis revenue was 22% higher.
Excluding the impact of acquisitions, Group revenue increased by 7%
compared with the same period last year.
In our industrial market, revenues were 15% up on the
corresponding period last year and up 5% excluding the impact of
acquisitions. A solid performance in our industrial laser market
was supplemented by better demand from the telecommunications and
semiconductor sectors.
Aerospace & Defence produced an excellent result with
revenues up 37% on an absolute basis and 22% after excluding the
impact of acquisitions. This growth has been driven by strong sales
of sub-assemblies for defence applications and continued buoyancy
in the sales of navigation components for the civil aerospace
market. Budgetary constraints in the US continue to create
headwinds, although these are having less of an impact on
established programmes.
Life Sciences revenues were up 15% in absolute terms compared
with the same period last year, but were flat excluding
acquisitions.
In line with our expectations, constrained government spending
continues to adversely affect our Scientific Research market
(economically the smallest part of our business) with revenues down
16%.
Order intake in the first half of the year has been solid. The
order book at 31 March 2014 was GBP29.7 million and the Company has
booked GBP34.5 million in orders since 1 October 2013.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating Net finance Taxation Earnings
Profit costs per share
-------------------- ------------------ ------------------ ------------------ ----------------
Half Year to 2014 2013 2014 2013 2014 2013 2014 2013
31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Reported 3,956 3,643 (293) (320) (1,031) (841) 11.0 11.2
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Amortisation
of acquired
intangible assets 775 427 - - (221) (113) 2.3 1.5
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Gain on bargain
purchase (1,039) - - - - - (4.4) -
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Impairment of
goodwill 1,538 - - - - - 6.5 -
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Restructuring
costs 172 - - - (58) - 0.5 -
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted 5,402 4,070 (293) (320) (1,310) (954) 15.9 12.7
-------------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted profit before tax was GBP5.1 million, 34% better than
the GBP3.8 million reported last year. This reflects the overall
increased volume in our Aerospace & Defence business, which has
driven benefits in the operational gearing of this segment. The two
acquisitions that were made in the six months to 31 March 2014 have
contributed GBP0.6 million to the profit before tax in this
period.
Operational and Strategy Review
Products and Markets - Industrial
Gooch & Housego's principal industrial markets are
industrial lasers, telecommunications, metrology, sensing and
semiconductor manufacturing. Industrial lasers are used in a
diverse range of precision material processing applications ranging
from microelectronics to automotive.
Business in our industrial laser market was solid in the first
six months of the year, underpinned by good business in our
acousto-optic components for fibre lasers and in our semiconductor
businesses. Sales of precision optics and acousto-optics into the
semiconductor market were excellent in the six months to 31 March
2014, being 22% higher compared with the equivalent period last
year.
The industrial laser market is continuing to evolve and grow,
driven by the success of the fibre laser. Gooch & Housego
anticipated these changes with the development of a family of
products for fibre laser applications, including the Fibre-Q, with
the result that the Company today is benefitting from these market
trends. Recent innovations have enabled Gooch & Housego to keep
up with the demanding requirements of this cost sensitive
application, paving the way for greater market penetration. In
other applications, most notably fibre-optic sensing, the Fibre-Q
is proving to be a key enabling technology that is now being
deployed by a number of our key customers.
While sales of products for fibre laser applications have been
growing steadily, demand for the traditional acousto-optic Q-switch
products has remained solid, sales of which represented only 10% of
our total business during the period under review. A consequence of
these market dynamics is a consolidation in the variety of
acousto-optic products required to meet customer needs. In response
to these changes, and as a result of the steady improvements in
productivity that the Company has made to the production of these
products, Gooch & Housego no longer needs to maintain three
separate acousto-optic manufacturing facilities. The decision has,
therefore, been made to close the Melbourne, Florida, operation and
to transfer the business to the Company's facilities in Ilminster,
UK, and Palo Alto, California. It is expected that this process
will be largely complete by the end of the current financial year.
The closure of the Melbourne site is expected to entail a cash cost
of $1.2 million and deliver annual cash savings of $1.0
million.
In telecommunications, sales of lithium niobate wafers for
modulation applications exceeded our forecast and completely offset
weaker demand for high-reliability products for undersea cable
infrastructure projects that were again delayed due to
uncertainties over funding. Indications are that this market is
poised to recover as funding is released for new projects.
Products and Markets - Aerospace and Defence
The Aerospace & Defence market for Gooch & Housego is
characterised by high-value, long-term programmes involving the
main US and European defence contractors. During the first six
months of 2014, the Company has seen a healthy increase in its
Aerospace & Defence business, with a significant proportion of
revenues coming from sub-assemblies. Gooch & Housego's
precision optics and acousto-optic technologies have contributed
most to the Aerospace & Defence markets in the last six months,
with navigation, range finding and target designation being the
principal applications.
Gooch & Housego continues to regard Aerospace & Defence
as a growth market and we are investing accordingly. During the
past twelve months, Space Photonics has emerged as a significant
new application area in which Gooch & Housego has the
opportunity to develop a market leading position by leveraging its
unique expertise in fibre optics, semiconductor lasers and
precision optics. These skills are particularly sought after in the
rapidly evolving field of satellite laser communications, guidance
and control systems. With support and encouragement from UK,
European and US space agencies, Gooch & Housego has
successfully bid on several development programmes, and has more in
the pipeline. Our recently established Systems Technology Group
(STG) has been instrumental in realising these opportunities, which
are focussed on the application of our core component technologies
in complex sub-systems as we seek to move up the value chain. This
is consistent with our strategy of delivering growth by migrating
from component supplier to solutions provider at the systems level.
We expect Space Photonics to become an increasingly important
sub-set of the Aerospace & Defence market.
Products and Markets - Life Sciences
Gooch & Housego's three principal Life Sciences revenue
streams are derived from diagnostics (fibre-optic modules for
optical coherence tomography (OCT) applications), surgery
(Q-switches for surgical lasers) and biomedical research
(acousto-optics for microscopy applications). In each application
area the Company is making steady progress in moving up the value
chain and is currently selling sub-systems as well as components to
several of our larger customers.
Whilst in absolute terms this market sector grew by 15% in the
six months to 31 March 2014, compared with the equivalent period
last year, when the impact of acquisitions is taken into account,
Life Sciences revenue was flat. The principal commercial
application of OCT systems is retinal imaging, and Gooch &
Housego continues to be the leading provider of fibre optic
solutions (products and design services) to this industry.
Following inconclusive discussions with potential commercial
partners earlier this year, it was decided to mothball the Group's
work on cancer diagnostics using hyperspectral imaging and to close
its research facility in New Jersey. The cost of closing this
facility was GBP0.8 million, of which GBP0.7 million related to
non-cash costs (GBP0.6 million of goodwill impairment). It is
expected that the closure of this facility will result in a cash
saving of GBP0.3 million per annum. Gooch & Housego will
continue to develop and manufacture hyperspectral imaging products
from its Orlando facility.
Products and Markets - Scientific Research
The key application in Scientific Research is laser inertial
confinement fusion ("laser fusion"), where lasers are used to
create the conditions found in the core of a star. In addition to
pure research in high energy and plasma physics, these vast laser
systems are being used to investigate whether this technology could
provide clean, carbon-free energy to reduce dependency on fossil
fuels. The first of these facilities is now complete, although
progress in demonstrating the potential of the technology as an
energy source has been slow. Gooch & Housego is continuing to
supply crystals for the second facility and expects ongoing
business to service replacement and maintenance requirements.
Strategy
Gooch & Housego has developed, and measures itself, on a set
of strategies to deliver long term, sustainable growth for its
shareholders. These can be categorised into two broad pillars:
"Diversification" and, "Moving up the Value Chain". In seeking to
achieve its strategic goals Gooch & Housego uses a variety of
tools, including investment in R&D to deliver organic growth,
acquisitions, market focused business development and strategic
partnerships.
In the first six months of the current financial year, Gooch
& Housego invested GBP2.9 million in R&D. This represents
8.4% of revenue and is 19% higher than the same period last year
(2013: GBP2.4m).
As the Company moves up the value chain, know-how and trade
secrets no longer provide adequate protection. As a result,
protecting intellectual property by means of patents is becoming
increasingly important. Gooch & Housego has an Intellectual
Property Committee, comprising senior R&D and management
personnel and chaired by the Chief Technology Officer, that meets
on a quarterly basis and whose remit is to identify and protect
commercially relevant intellectual property. So far this year four
patents have been granted and a further six inventions have patents
that are in the process of being filed.
Diversification: Gooch & Housego seeks to develop, through
R&D and acquisition, a presence in new markets that offer the
potential for significant growth as a result of their adoption of
photonic technology, whilst also reducing exposure to cyclicality
in any particular sector. In the current period Gooch & Housego
has grown its business in its core Industrial, Aerospace &
Defence and Life Sciences markets. Moreover, the business has
continued to invest in its quality systems and business development
in order to strengthen its position in these markets in the
future.
Moving up the Value Chain: Gooch & Housego seeks to move up
the value chain to more complex sub-assemblies and systems through
leveraging its excellence in materials and components, and by
providing photonic design and engineering solutions for our
customers. Gooch & Housego is progressively making the
transition from components supplier to solutions provider. A
significant proportion of our business in the Aerospace &
Defence market now comes from the sale of sub-systems rather than
discrete components.
Fifteen months ago the Company introduced a new initiative to
accelerate this process with the formation of the STG, which
provides design and engineering services and leads Gooch &
Housego's participation in a number of funded research programmes.
Its initial focus has been on opportunities to take Gooch &
Housego up the value-chain in the fields of Space Photonics and
optical coherence tomography for biomedical imaging applications.
During the period under review, Gooch & Housego has made
significant investments in the STG in the form of a dedicated new
facility at the Company's Torquay site, the acquisition of
Constelex and an increase in headcount to eleven with a broad range
of skills in project management, design and modelling of complex
optical and electronic systems.
Vertical integration: Vertical integration is a key strategic
objective, not merely a by-product of moving up the value chain. In
the field of photonics, certain materials (e.g. optical crystals),
and materials processing operations (polishing, thin-film coating,
fused-fibre processes etc.) have a critical bearing on the
performance, cost and reliability of the final product, whether it
is a component such as the Q-switch or a complex satellite
communications system. Gooch & Housego has established a
portfolio of world-class photonic products and capabilities that
enable it to provide uniquely integrated solutions for the most
demanding applications.
Gooch & Housego will continue to evaluate acquisition
opportunities that have the potential to accelerate delivery of the
Company's strategic objectives. Having established a presence in
its target markets, Gooch & Housego is now focussing on moving
up the value chain in each of those markets. Acquisition
opportunities that enhance the Company's ability to wrap
electronics and software around core photonic products to yield
system-level solutions are of greater relevance today than those
that merely broaden Gooch & Housego's range of component
capabilities. The acquisition of Constelex is a good example of
this strategy in action, paving the way to translate Gooch &
Housego's leadership in space qualified fibre optic components
(unit values typically in the $100 to $1,000 range) into a family
of erbium-doped fibre amplifier systems for satellite
communications with unit values up to $100,000.
Cash Flow and Financing
In the six months to 31 March 2014 Gooch & Housego generated
cash from operations of GBP4.9 million, compared with GBP2.8
million in the same period of 2013.
The Company's strategies of diversifying into industries such as
Aerospace & Defence and Life Sciences and moving up the value
chain inherently put demands on working capital. Our customers in
Aerospace & Defence require safety stocks to be held and the
move to systems and sub-systems lead to Gooch & Housego
managing longer supply chains and carrying higher levels of
inventory. In recognising these upward pressures on working
capital, Gooch & Housego has introduced a number of initiatives
to help reduce this impact. Excluding the impact of acquisitions,
inventories have remained stable and trade debtors have reduced by
GBP0.9 million. Capital expenditure on property, plant and
equipment was GBP0.9 million in the period (2013: GBP1.0 million).
The main fixed asset additions were in relation to expanding our
Torquay facilities and equipment to accommodate the STG.
During the period to 31 March 2014, GBP5.5 million, net of cash
acquired, was invested in relation to the acquisitions of Spanoptic
Limited and Constelex Limited.
Cash, cash equivalents and bank overdrafts as at 31 March 2014
amounted to a net positive cash position of GBP12.0 million,
compared to GBP12.1 million at 30 September 2013.
Since 30 September 2013, the Company's net cash position has
reduced from GBP5.7 million to GBP2.3 million, following the
acquisition of Spanoptic Limited and Constelex Limited
At 31 March 2014, the Group's banking facilities with its
bankers, the Royal Bank of Scotland, comprise an $18 million dollar
denominated term loan (of which $4.5 million is drawn), a GBP3.1
million sterling denominated term loan (of which GBP1.8 million is
drawn), an $8 million revolving credit facility (undrawn as at 31
March 2014) and a fully drawn $8 million capital expenditure
facility. All facilities are committed until April 2015, subject to
certain covenant provisions.
Staff
The Company workforce increased from 581 at 30 September 2013 to
644 at the end of March 2014. This increase is was largely due to
the acquisitions of Spanoptic Limited and Constelex Limited.
Dividends
The Directors have declared an interim dividend of 2.6p per
share (2013: 2.3p per share), a 13% increase on the prior period,
which is reflective of the Directors' confidence in the Company's
long term growth. This will be payable on 21 July 2014 to
shareholders on the register as at 27 June 2014.
Prospects
Whilst the strengthening of sterling in recent months represents
a headwind to growth, Gooch & Housego's markets continue to
exhibit attractive, long-term structural growth drivers as photonic
technology is adopted across an increasingly wide range of
application areas. We continue to invest in our business with
confidence to position it for sustainable long-term growth.
Julian Blogh Gareth Jones Andrew Boteler
Chairman Chief Executive Officer Chief Financial Officer
10 June 2014 10 June 2014 10 June 2014
Unaudited interim results for the 6 months ended 31 March
2014
Group Income Statement Half Year Half Year Full Year
to to to
31 Mar 2014 31 Mar 2013 30 Sep 2013
Note (Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- -------------
Revenue 5 34,422 28,989 63,252
Cost of revenue (20,960) (17,674) (37,635)
-------------- -------------- -------------
Gross profit 13,462 11,315 25,617
Research and Development (2,577) (2,423) (4,913)
Sales and Marketing (2,301) (2,218) (4,666)
Administration and other
expenses (5,179) (4,078) (8,814)
Other income 551 1,047 1,727
-------------- -------------- -------------
Operating profit 5 3,956 3,643 8,951
Net finance costs (293) (320) (608)
-------------- -------------- -------------
Profit before income tax
expense 3,663 3,323 8,343
Income tax expense 6 (1,031) (841) (2,151)
-------------- -------------- -------------
Profit for the period 2,632 2,482 6,192
Earnings per share 7 11.0p 11.2p 27.7p
-------------- -------------- -------------
Reconciliation of operating profit to adjusted operating
profit:
Half Year Half Year Full Year
to to to 30 Sep
2013
31 Mar 2014 31 Mar 2013 (Audited)
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Operating profit 3,956 3,643 8,951
Amortisation of acquired
intangible assets 775 427 875
Acquisition costs - - 164
Restructuring costs 172 - 278
Gain on bargain purchase: (1,039) - -
Spanoptic Limited
Impairment of goodwill (including 1,538 - -
CDI closure)
-------------- -------------- ------------
Adjusted operating profit 5,402 4,070 10,268
-------------- -------------- ------------
Group Statement of Comprehensive Half Year Half Year Full Year
Income to to to 30 Sep
2013
31 Mar 31 Mar 2013 (Audited)
2014
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Profit for the period 2,632 2,482 6,192
Other comprehensive income
Fair value adjustment of interest
rate swap net of tax 5 41 90
Currency translation difference (837) 1,841 (364)
-------------- -------------- ------------
Other comprehensive (expense)/income
for the period (832) 1,882 (274)
Total comprehensive income for
the period 1,800 4,364 5,918
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2014
Group Balance Sheet 31 Mar 2014 31 Mar 2013 30 Sep 2013
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Non-current assets
Property, plant and equipment 24,339 21,523 21,456
Intangible assets 20,697 21,130 19,821
Deferred income tax assets 3,462 4,203 3,830
-------------- -------------- ------------
48,498 46,856 45,107
Current assets
Inventories 13,976 14,188 13,390
Income tax assets 508 - 420
Trade and other receivables 14,106 13,515 12,706
Cash and cash equivalents 12,016 11,672 14,558
40,606 39,375 41,074
Current liabilities
Trade and other payables (9,929) (10,569) (10,461)
Borrowings (7,972) (6,082) (5,726)
Income tax liabilities (131) (841) (307)
Provision for other liabilities
and charges (272) (324) (271)
-------------- -------------- ------------
(18,304) (17,816) (16,765)
Net current assets 22,302 21,559 24,309
-------------- -------------- ------------
Non-current liabilities
Borrowings (1,698) (4,879) (3,113)
Deferred income tax liabilities (2,536) (618) (1,330)
Derivative financial instruments (32) (83) (34)
-------------- -------------- ------------
(4,266) (5,580) (4,477)
Net assets 66,534 62,835 64,939
-------------- -------------- ------------
Shareholders' equity
Capital and reserves
attributable to equity
shareholders
Called up share capital 4,760 4,491 4,620
Share premium account 15,420 14,757 15,213
Merger reserve 2,671 2,671 2,671
Hedging reserve (74) (128) (79)
Cumulative translation
reserve (1,697) 1,347 (860)
Retained earnings 45,454 39,697 43,374
-------------- -------------- ------------
Equity Shareholders' Funds 66,534 62,835 64,939
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2014
Statement of Changes in Share Share
Equity capital premium Merger Hedging Retained Total
account account reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- --------- ---------- ----------- ---------
At 1 October 2012 4,382 14,311 2,671 (169) 37,371 58,566
Profit for the period - - - - 2,482 2,482
Other comprehensive income
for the period - - - 41 1,841 1,882
--------- --------- --------- ---------- ----------- ---------
Total comprehensive income
for the period - - - 41 4,323 4,364
--------- --------- --------- ---------- ----------- ---------
Dividends - - - - (712) (712)
Proceeds from shares issued 109 446 - - (33) 522
Fair value of employee services - - - - 235 235
Tax charge relating to share
option schemes - - - - (140) (140)
109 446 - - (650) (95)
At 31 March 2013 (unaudited) 4,491 14,757 2,671 (128) 41,044 62,835
At 1 October 2013 4,620 15,213 2,671 (79) 42,514 64,939
Profit for the period - - - - 2,632 2,632
Other comprehensive income
for the period - - - 5 (837) (832)
--------- --------- --------- ---------- ----------- ---------
Total comprehensive income
for the period - - - 5 1,795 1,800
--------- --------- --------- ---------- ----------- ---------
Dividends - - - - (950) (950)
Proceeds from shares issued 140 207 - - (120) 227
Fair value of employee services - - - - 122 122
Tax credit relating to share
option schemes - - - - 396 396
140 207 - - (549) (202)
At 31 March 2014 (unaudited) 4,760 15,420 2,671 (74) 43,757 66,534
Unaudited interim results for the 6 months ended 31 March
2014
Group Cash Flow Statement Half Year Half Year Full Year
to to to 30 Sep
2013
31 Mar 31 Mar (Audited)
2014 2013
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Cash flows from operating activities
Cash generated from operations 4,905 2,794 10,130
Income tax paid (582) (53) (882)
-------------- -------------- ------------
Net cash generated from operating
activities 4,323 2,741 9,248
-------------- -------------- ------------
Cash flows from investing activities
Acquisition of subsidiaries
(net of cash acquired) (5,532) (20) (22)
Purchase of property, plant
and equipment (853) (896) (2,032)
Sale of property, plant and
equipment 88 - 67
Purchase of intangible assets (74) (56) (202)
Interest received 3 6 15
-------------- -------------- ------------
Net cash used in investing
activities (6,368) (966) (2,174)
-------------- -------------- ------------
Cash flows from financing activities
Drawdown of acquisition borrowing 4,971 - -
facility
Repayment of borrowings (1,704) (1,694) (3,394)
Proceeds from issues of share
capital 123 522 1,044
Dividends paid to ordinary
shareholders (950) (712) (1,229)
Interest paid (230) (269) (505)
Net cash generated by / (used
in) financing activities 2,210 (2,153) (4,084)
-------------- -------------- ------------
Net increase / (decrease) in
cash, cash equivalents and
revolving credit facility 165 (378) 2,990
Cash, cash equivalents and
revolving credit facility at
beginning of the period 12,088 9,235 9,235
Exchange (losses) / gains on
cash and revolving credit facility (237) 180 (137)
-------------- -------------- ------------
Cash, cash equivalents and
revolving credit facility at
the end of the period 12,016 9,037 12,088
-------------- -------------- ------------
Cash, cash equivalents and revolving credit facility at the end
of the period are made up of:
Half Year Half Year Full Year
to to to
31 Mar 31 Mar 30 Sep
2014 2013 2013
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Cash and cash equivalents 12,016 11,672 14,558
Revolving credit facility - (2,635) (2,470)
Cash, cash equivalents and
revolving credit facility
at the end of the period 12,016 9,037 12,088
-------------- -------------- ------------
Notes to the Group Cash Half Year Half Year Full Year
Flow Statement to to to
31 Mar 2014 31 Mar 2013 30 Sep 2013
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Profit before income tax 3,663 3,323 8,343
Adjustments for:
- Amortisation of acquired
intangible assets 775 427 875
- Impairment of goodwill 1,538 - -
- Gain on bargain purchase: (1,039) - -
Spanoptic Limited
- Amortisation of other
intangible assets 79 84 168
- Depreciation 1,227 1,042 1,949
- Profit on disposal of
property, plant
and equipment 25 - 91
- Share based payment obligations 122 235 341
- Finance income (3) (6) (15)
- Finance costs 296 326 623
-------------- -------------- -------------
Total adjustments 3,020 2,108 4,032
Changes in working capital
- Inventories (72) (786) (1,328)
- Trade and other receivables 877 (562) (1,208)
- Trade and other payables (1,507) (1,189) (538)
- Provisions for liabilities
and charges (1,076) (100) 829
-------------- -------------- -------------
Total changes in working
capital (1,778) (2,637) (2,245)
Cash generated from operating
activities 4,905 2,794 10,130
-------------- -------------- -------------
Reconciliation of net cash flow to movements in net debt
Half Year Half Year Full Year
to to to
31 Mar 2014 31 Mar 2013 30 Sep
2013
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Increase / (decrease) in
cash in the period 165 (378) 2,990
Drawdown of acquisition (4,971) - -
facility
Repayment of borrowings 1,704 1,694 3,394
Changes in net debt resulting
from cash flows (3,102) 1,316 6,384
Finance leases acquired (257) - -
Translation differences (14) (282) (342)
-------------- -------------- ------------
Movement in net debt in
the period / year (3,373) 1,034 6,042
Net cash/(debt) at start
of period 5,719 (323) (323)
Net cash at end of period 2,346 711 5,719
-------------- -------------- ------------
Analysis of net debt
At 1 Oct Exchange Non-cash At 31
2013 Cash flow movement movement Mar
2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------- ---------- ---------- --------
Cash at bank and
in hand 14,558 (2,305) (237) - 12,016
Revolving credit
facility (2,470) 2,470 - - -
12,088 165 (237) - 12,016
Debt due within 1
year (3,256) (4,971) 346 - (7,881)
Debt due after 1
year (3,113) 1,605 (123) - (1,631)
Finance leases - 99 - (257) (158)
--------- ----------- ---------- ---------- --------
Net cash 5,719 (3,102) (14) (257) 2,346
--------- ----------- ---------- ---------- --------
Notes to the Interim Report
1. Basis of Preparation
The unaudited Interim Report has been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards ("IFRS"), as adopted by the European
Union.
The Interim Report was approved by the Board of Directors and
the Audit Committee on 10 June 2014. The Interim Report does not
constitute statutory financial statements within the meaning of the
Companies Act 2006 and has not been audited.
Comparative figures in the Interim Report for the year ended 30
September 2013 have been taken from the Group's audited statutory
financial statements on which the Group's auditors,
PricewaterhouseCoopers LLP, expressed an unqualified opinion. The
comparative figures to 31 March 2013 are unaudited.
The Interim Report will be announced to all shareholders on the
London Stock Exchange and published on the Group's website on 10
June 2014. Copies will be available to members of the public upon
application to the Company Secretary at Dowlish Ford, Ilminster,
Somerset, TA19 0PF.
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 September 2013,
as described in those financial statements.
2. Application of IFRS
Adoption of new standards
During the current reporting period there were no new standards
or amendments which had a material impact on the net assets of the
Group. In addition, standards or amendments issued but not yet
effective are not expected to have a material impact on the net
assets of the Group. However, the Group is closely monitoring the
IASB projects on Contract Revenue recognition and the Lease
accounting overhaul as they could potentially have a material
impact on the Group's results.
3. Estimates
The preparation of interim financial statements requires
management to make estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgments made by management in
applying the Company's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 30 September
2013.
4. Financial risk management
The Company's activities expose it to a variety of financial
risks, market risk (including currency risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk.
The interim condensed consolidated financial statements do not
include all financial risk management information and disclosures
required in the annual financial statements and should be read in
conjunction with the Company's annual financial statements as at 30
September 2013.
There have been no changes to the risk management policies since
the year end.
5. Segmental analysis
Aerospace Scientific
& Defence Life Sciences Industrial Research Corporate Total
For half year to 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2014
Revenue
Total revenue 10,218 3,608 20,935 1,679 - 36,440
Inter and intra-division - - (2,018) - - (2,018)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
External revenue 10,218 3,608 18,917 1,679 - 34,422
Divisional expenses (8,460) (3,023) (14,591) (1,592) (222) (27,888)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
EBITDA(1) 1,758 585 4,326 87 (222) 6,534
EBITDA % 17.2% 16.2% 22.9% 5.2% - 19.0%
Depreciation and Amortisation (286) (129) (765) (45) (79) (1,304)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit before
amortisation of acquired
intangible assets and
impairment of goodwill 1,472 456 3,561 42 (301) 5,230
Amortisation of acquired
intangible assets and
impairment of goodwill - - - - (1,274) (1,274)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit 1,472 456 3,561 42 (1,575) 3,956
Operating profit margin
% 14.4% 12.6% 18.8% 2.5% - 11.5%
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Aerospace Scientific
& Defence Life Sciences Industrial Research Corporate Total
For half year to 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2013
Revenue
Total revenue 7,437 3,142 18,430 2,006 - 31,015
Inter and intra-division - - (2,026) - - (2,026)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
External revenue 7,437 3,142 16,404 2,006 - 28,989
Divisional expenses (6,658) (2,617) (12,799) (1,433) (286) (23,793)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
EBITDA(1) 779 525 3,605 573 (286) 5,196
EBITDA % 10.5% 16.7% 22.0% 28.6% - 17.9%
Depreciation and Amortisation (281) (124) (558) (80) (83) (1,126)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit before
amortisation of acquired
intangible assets 498 401 3,047 493 (369) 4,070
Amortisation of acquired
intangible assets - - - - (427) (427)
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
Operating profit 498 401 3,047 493 (796) 3,643
Operating profit margin
% 6.7% 12.8% 18.6% 24.6% - 12.6%
------------------------------- ----------- -------------- ----------- ----------- ---------- ---------
(1)EBITDA = Earnings before interest, tax, depreciation and
amortisation.
All of the amounts recorded are in respect of continuing
operations.
5. Segmental analysis continued
Analysis of revenue by destination
Half year Half year
to to
31 Mar 2014 31 Mar 2013
(Unaudited) (Unaudited)
GBP'000 GBP'000
------------- -------------
United Kingdom 6,807 4,093
America 14,604 12,940
Continental Europe 7,733 7,491
Asia-Pacific 5,278 4,465
34,422 28,989
------------- -------------
6. Income tax expense
Analysis of tax charge in the period
Half Year Half Year Full Year
to to to 30 Sep
2013 (Audited)
31 Mar 2014 31 Mar
2013
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
--------------
Current taxation
UK Corporation tax 526 740 1,263
Overseas tax 404 52 238
Adjustments in respect of prior
year tax charge - 86 (304)
-------------- -------------- ----------------
Total current tax 930 878 1,197
Deferred tax
Origination and reversal of temporary
differences 101 (1) 677
Adjustments in respect of prior
year deferred tax - (36) 234
Impact of tax rate change in 2013
to 20% - - 43
-------------- -------------- ----------------
Total deferred tax 101 (37) 954
Income tax expense per income
statement 1,031 841 2,151
The tax charge for the six months ended 30 March 2014 is based
on the estimated effective rate of the tax for the Group for the
full year to 30 September 2014. The estimated rate is applied to
the profit before tax.
7. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on
the profit for the period using as a divisor the weighted average
number of Ordinary Shares in issue during the period. The weighted
average number of shares is given below.
Half Year Half Year Full Year
to to to 30 Sep
2013
31 Mar 2014 31 Mar (Audited)
2013
(Unaudited) (Unaudited)
No. No. No.
-------------- -------------- ------------
Number of shares used for basic
earnings per share 23,864,426 22,123,658 22,376,650
Dilutive shares 125,595 1,652,880 1,097,927
Number of shares used for dilutive
earnings per share 23,990,021 23,776,538 23,474,577
-------------- -------------- ------------
A reconciliation of the earnings used in the earnings per share
calculation is set out below:
Half Year Half Year Full Year
to to to
31 Mar 2014 31 Mar 2013 30 Sep 2013
(Unaudited)
(Unaudited) (Audited)
p per p per p per
GBP'000 share GBP'000 share GBP'000 share
-------- ------- -------- ------- -------- -------
Basic earnings per share 2,632 11.0p 2,482 11.2p 6,192 27.7p
Adjustments net of income
tax expense:
Amortisation of acquired
intangible assets 554 2.3p 329 1.5p 650 2.9p
Goodwill impairment 1,538 6.5p - - - -
Gain on bargain purchase:
Spanoptic Limited (1,039) (4.4)p - - - -
Acquisition costs - - - - 122 0.5p
Restructuring costs 114 0.5p - - 206 0.9p
Total adjustments net of
income tax expense 1,167 4.9p 329 1.5p 978 4.3p
Adjusted basic earnings per
share 3,799 15.9p 2,811 12.7p 7,170 32.0p
-------- ------- -------- ------- -------- -------
Basic diluted earnings per
share 2,632 11.0p 2,482 10.4p 6,192 26.4p
Adjusted diluted earnings
per share 3,799 15.8p 2,811 11.8p 7,170 30.5p
------ ------ ------ ------ ------ ------
Adjusted earnings per share before amortisation and adjustments
has been shown because, in the opinion of the Directors, it more
accurately reflects the trading performance of the Group.
8. Dividend
The Directors have declared an interim dividend of 2.6 pence per
share for the half year ending 31 March 2014. This dividend has not
been accounted for within the period to 31 March 2014 as it is yet
to be paid.
Half Year Half Year Full Year
to to to 30 Sep
2013
31 Mar 2014 31 Mar (Audited)
2013
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Final 2013 dividend paid : 4.0p
per share 950 712 -
2013 Interim dividend paid :
2.3p per share - - 517
Final 2012 dividend paid in 2013
: 3.2p per share - - 712
-------------- -------------- ------------
950 712 1,229
-------------- -------------- ------------
9. Borrowings
The group's banking facilities with the Royal Bank of Scotland
comprise an $18 million dollar denominated term loan (fully drawn
down), a GBP3.1 million sterling denominated term loan (fully drawn
down). The term loan balances at 31 March 2014 were $4.5 million
and GBP1.8 million sterling respectively.
In addition, the Company has an undrawn revolving credit
facility of $8.0 million and a fully drawn capital expenditure
facility of $8.0 million.
All facilities are committed until April 2015 and attract an
interest rate of between 2.25% and 3.00% above LIBOR dependent upon
the Company's leverage ratio.
10. Called up share capital
2014 2013 2014 2013
No. No. GBP'000 GBP'000
---------
Allotted, issued and fully
paid
Ordinary share of 20p
each 23,797,999 22,456,965 4,760 4,491
------------- ------------- --------- ---------
11. Derivative financial instruments
Half Year Half Year Full Year
to to to
31 Mar 31 Mar 30 Sep
2014 2013 2013
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Interest rate swap 96 166 103
-------------- -------------- ------------
Current liability portion 64 83 69
Non-current liability portion 32 83 34
-------------- -------------- ------------
96 166 103
The notional principal amount of the outstanding interest swap
contract at 31 March 2014 was $6.75 million (2013: $11.25 million).
The end date for the interest rate swap is 1 April 2015. At 31
March 2014, the fixed rate of the interest rate swap was 2.14% and
the floating rate was US dollar LIBOR. The fair value of the swap
is a mark to market calculation based on future interest rate
expectations over the life of the swap. This is a level 2 method of
determining fair value as defined by IFRS 7.
12. Acquisition of Spanoptic Limited
On 15 October 2013, the Group completed the acquisition of the
entire issued share capital of Spanoptic Limited, a Glenrothes,
Scotland based manufacturer of precision optical components.
The consideration for the acquisition was GBP6.6m, paid in cash
on completion.
The fair value of the assets acquired is summarised as
follows:
Provisional
fair value
GBP'000
------------------------------- ------------
Property, plant and equipment 3,575
Intangible assets 2,631
Cash 1,006
Trade and other receivables 1,768
Inventory 923
Trade and other payables (866)
Current and deferred tax
liabilities (1,141)
Hire purchase and finance
lease liabilities (257)
------------------------------- ------------
Net assets acquired 7,639
------------------------------- ------------
Consideration paid:
Cash 6,600
------------------------------- ------------
Gain on bargain purchase (1,039)
------------------------------- ------------
The fair value of the net assets acquired are provisional
pending finalisation of the fair value exercise in relation to
those assets.
The fair value of the intangible assets represents the estimated
fair value of Spanoptic's customer relationships and its brand.
These have been valued using a discounted cash flow model.
The gain on bargain purchase of GBP1.0 million has been credited
to the income statement.
Post-acquisition, the acquired business contributed GBP3.4
million of revenue and GBP0.5 million of profit after tax to the
consolidated income statement.
13. Acquisition of Constelex Technology Enablers Limited
On 26 November 2013, the Group completed the acquisition of the
entire issued share capital of Constelex Technology Enablers
Limited, designer and manufacturer of advanced photonic systems
based in Athens, Greece.
The consideration for the acquisition was EUR650,000
(GBP539,000), comprising EUR400,000 (GBP333,000) in cash, followed
by EUR250,000 (GBP207,000) in Gooch & Housego shares when the
activities are relocated to the UK.
The fair value of the assets acquired is summarised as
follows:
Provisional
fair value
GBP'000
------------------------------- ------------
Property, plant and equipment 18
Intangible assets 327
Cash 401
Trade and other receivables 813
Trade and other payables (1,202)
Current and deferred tax
liabilities (65)
Net assets acquired 292
------------------------------- ------------
Consideration paid:
Cash 333
Deferred share consideration 207
------------------------------- ------------
Total consideration 540
------------------------------- ------------
Goodwill 248
------------------------------- ------------
The deferred share consideration is payable to the vendors when
they relocate to the UK. EUR125,000 of the deferred consideration
was issued on 24 February 2014.
The fair value of the net assets acquired are provisional
pending finalisation of the fair value exercise in relation to
those assets.
The fair value of the intangible assets represents the estimated
fair value of future secured grant funding based on a discounted
cash flow valuation.
Goodwill reflects items not separately recognised.
Post-acquisition, the acquired business contributed GBP96,000 of
revenue and GBP21,000 of profit after tax to the consolidated
income statement.
14. Post balance sheet events
On 16 April 2014, management announced the proposed closure of
the Group's Melbourne, Florida facility in connection with the
consolidation of acousto-optic development and manufacturing into
two of the Group's existing sites.
The costs of the proposed closure will be recorded in the
results for the second half of 2014.
On 31 May 2014 Terry Scribbins retired as Chief Operating
Officer.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSEFMUFLSEFM
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