TIDMGHH
RNS Number : 5483I
Gooch & Housego PLC
27 November 2018
For immediate release 27 November 2018
Gooch & Housego PLC
("Gooch & Housego", "G&H", the "Company" or the
"Group")
PRELIMINARY RESULTS FOR THE YEARED 30 SEPTEMBER 2018
Gooch & Housego PLC (AIM: GHH), the specialist manufacturer
of optical components and systems, today announces its preliminary
results for the year ended 30 September 2018.
Year ended 30 September 2018 2017 Change
Revenue (GBPm) 124.9 112.0 11.5%
------- ------ --------
Adjusted profit before tax
(GBPm)* 18.8 16.1 16.4%
------- ------ --------
Adjusted basic earnings per
share (pence)* 57.2 49.4 15.8%
------- ------ --------
Statutory profit before tax
(GBPm) 10.1 12.6 (19.8%)
------- ------ --------
Basic earnings per share (pence) 29.3 36.4 (19.5%)
------- ------ --------
Total dividend per share (pence) 11.3 10.2 10.8%
------- ------ --------
Net (debt) / cash (GBPm) (10.6) 14.9 (25.5)
------- ------ --------
*adjusted figures exclude the amortisation of acquired
intangible assets, impairment of goodwill, adjustments to accrued
contingent consideration, exceptional items being restructuring
costs, site closure costs, transaction costs, and interest on
deferred consideration.
Operating & Strategic Highlights
-- A backdrop of generally favourable market conditions in our
three main sectors of industrial, aerospace & defence and life
sciences / biophotonics.
-- Demand was high for critical components used in
microelectronic manufacturing. Hi- reliability fibre couplers used
in undersea cable networks down overall, though came back strongly
in the latter part of the year.
-- Strategically important investments were made in order to
increase capacity in industrial and medical lasers and to exploit
areas of R&D identified as having high growth potential for our
photonic technologies.
-- Considerable progress was made towards our strategic goals of
further diversification and moving up the value chain, including
the acquisitions of ITL and Gould Fiber Optics in August and
September 2018 respectively.
Financial Highlights
-- Revenue 11.5% higher than FY 2017, 11.1% excluding foreign
exchange and acquisitions / disposals.
-- Adjusted profit before tax up 16.4%.
-- Adjusted basic earnings per share up 15.8%
-- GBP24m invested in acquisitions and capital expenditure of
GBP7.2m. Net debt of GBP10.6m (c.0.5 X EBITDA)
-- Record year end order book of GBP96.1m, up 33% from 30
September 2017, 17% excluding foreign exchange and acquisitions/
disposals.
Mark Webster, Chief Executive Officer, commented
"G&H has had another good financial year. We have been able
to take advantage of generally positive market conditions and
continue to execute on our long term strategy.
"Our strong performance has enabled us to continue to invest in
manufacturing capacity and R&D, as well as bringing
complementary new technologies and customers into G&H through
acquisitions.
"There has been some recent gradual softening in demand growth
for critical components in microelectronic manufacturing, offset by
a return to strong demand growth for our fibre optics business
generally, and hi-reliability fibre couplers in particular.
"We remain aware of potential macroeconomic and political risks.
Overall G&H has a robust order book combined with greater
diversification. The Board remains confident that the Group is well
positioned to continue to deliver further progress in FY2019 and
beyond."
For further information please contact:
Gooch & Housego PLC Mark Webster / Andrew Boteler 01460 256440
Investec Bank plc (Nomad
& Broker) Patrick Robb / David Anderson 020 7597 5970
Buchanan Mark Court / Sophie Wills 020 7466 5000
Expected Financial Calendar
Annual General Meeting 20 February 2019
Payment date for final dividend for the 1 March 2019
year ended 30 September 2018 to shareholders
on the register at close of business 25
January 2019.
Subject to approval by shareholders at
the Annual General Meeting
Interim Results announcement June 2019
Financial Year End 30 September 2019
Preliminary announcement of results for November 2019
the year ended
30 September 2019
Chairman's Statement
2018 was another year of significant progress in the development
of your company. Broadly favourable market conditions, combined
with development programmes entering production, generated another
positive set of results, while we responded to unprecedented demand
patterns in some of our sites. G&H delivered record revenues,
adjusted profits and adjusted earnings per share in the year.
The business continued to execute well on its long standing
strategies of diversification and moving up the value chain,
enhanced by the acquisitions made during the year of VITL Ltd
("ITL") and Gould Fiber Optics ("GFO"). ITL will substantially
increase the group's life sciences / biophotonics presence and
provide a much improved systems capability. GFO consolidates
G&H's position as a world leader in fused fibre technology and
gives enhanced access to the US aerospace and defence sector.
During the year G&H accelerated its transformation programme
and we enter next year with an organisation aligned to our target
end clients in the industrial, life-sciences / biophotonics, and
aerospace and defence sectors. Our manufacturing facilities have
been brought together into four groups based on their underlying
technology, each under dedicated leadership. This will enable an
increased focus on investment in people, plant and processes and
position the company well for future growth.
In successfully responding to the challenges of FY2018 an
exceptional effort was required of many people. I would like to
express my thanks to my fellow directors and to all employees of
G&H. During the year I took over from Gareth Jones as Chairman.
On behalf of the Company and his colleagues I would like to thank
Gareth for his huge contribution to G&H over the many years of
his leadership both as CEO and then Chairman. Andrew Boteler, Chief
Financial Officer, has informed the Board that he will retire in
the summer of 2019 and step down from the Board. I would like to
thank Andy for the support he has given me, the Board and the
company and wish him the best for the future. The company has
appointed a specialist recruitment agency and has begun a search
for a new Chief Financial Officer.
As the Group grows we are committed to continue to improve the
quality of corporate governance and in September confirmed that we
would apply the UK Corporate Governance Code to how we run the
company. As a Board we are also very aware of the value of
diversity and our need to improve women's representation at all
levels. We are supportive of the approaches suggested in the
Hampton-Alexander review and are committed to improve
representation of women at the Board and in senior leadership
positions in the Group.
While we remain conscious of potential risks arising from
macroeconomic challenges and the growth of global protectionism,
your business enters the new financial year with a record order
book and enhanced opportunities derived from the continued
investment in new technologies, capabilities and routes to market.
The Group is well positioned to continue to deliver in FY2019 and
beyond.
Gary Bullard
Chairman
27 November 2018
Chief Executive Officer's Statement
FY2018 Performance
FY 2018 revenue of GBP124.9 million represents an increase of
11.5% over the previous year or excluding foreign exchange and
acquisitions / disposals, an increase of 11.1%. Adjusted profit
before tax was GBP18.8 million, an increase of 16.4% over the
previous year.
Gooch and Housego enters the new financial year with a record
order book, which, at 30 September 2018, stood at GBP96.1 million,
an increase of 33% compared to the same time last year. Excluding
the impact of foreign exchange and acquisitions and disposals this
represents an increase of 17%.
The Company benefited from generally positive market conditions,
particularly for critical components used in microelectronic
manufacturing, which experienced unprecedented levels of growth.
Despite a lower year overall for high reliability fused fibre
products used in undersea cables, they performed well in the latter
part of the year and exited with a strong order book.
Strategically important investments were made in people,
processes, and "best in class" capital equipment during the year,
allowing us to significantly increase capacity, especially at those
sites supplying critical components used in microelectronic
manufacturing.
G&H was able to make further investment in areas identified
as having high growth potential for our photonic technologies such
as the latest industrial laser systems, harsh environment sensing,
unmanned aerial vehicles ("UAVs"), novel aerospace and defence
programmes, space satellite communications, laser surgery and
medical diagnostics.
We acquired two companies in the last two months of the
financial year and they have strengthened our presence in life
sciences and the aerospace and defence sector. The life science
company, ITL, will enable us to move further up the value chain,
with a much enhanced systems capability. Gould Fiber Optics allows
enhanced access for our fibre products to US aerospace and defence
markets.
Strategic goals
Considerable progress has been made towards our strategic goals
of further diversification and moving up the value chain.
Aerospace and defence ("A&D") and life sciences both provide
a counter balance to the exposure that the industrial laser sector
has to the global economic cycle. Our main customers are the tier
one A&D and medical diagnostic companies, who often prefer us
to provide them with sub system and system solutions, providing a
strong impetus to move up the value chain. This coupled with the
regulatory and compliance hurdles inherent in A&D and life
sciences, provides a very robust business model, with high barriers
to entry. We are increasingly well placed to serve these
companies.
Our aim is to achieve a 'critical mass' in both the A&D and
life sciences sectors and in an 'ideal world' an equal split
between the three main market sectors across G&H.
In large part this has been achieved in A&D, which
represented 32.7% of FY 2018 revenue ( FY 2017: 31.1%). Life
sciences has a smaller share of FY 2018 revenue, representing 8.9 %
(FY 2017: 8.5%), but the acquisition of ITL should see life science
revenue take a substantial step forward in FY 2019.
Sub systems and systems now represent 25.6% of our business ( FY
2017: 22.1%).
Acquisitions and disposals
Kent Periscopes, acquired in July 2016, performed well in FY2018
and have now substantially achieved their full earn out potential.
StingRay Optics, acquired in February 2017, received the first part
of its earn out payment, having exceeded its first performance
target. We were pleased with the performance of both companies
during FY 2018 and the way they have both integrated into
G&H.
In August and September 2018 we acquired ITL and Gould Fiber
Optics, respectively.
ITL is a UK based specialist in the design, development and
manufacture of high quality medical devices. It enables G&H to
double its life science business and move up the value chain, as
all of ITL's sales come from system based products.
GFO is a US based market leading supplier of key enabling
components to tier one US A&D customers. It provides a platform
for G&H to obtain enhanced access for our fibre based business
with Tier 1 US based aerospace & defence companies.
Both acquisitions are very recent, but, so far, we are pleased
with their performance and level of integration.
G&H shut down and sold most of the trade and assets of its
Orlando light measurement business in September 2018. It was a
non-core business and delivered marginal returns and made a small
loss in FY2018. Its disposal will have a limited impact on future
earnings.
Research and Development ("R&D")
There has been continued benefit from concentrating our R&D
efforts on fewer higher return projects. During FY 2018 we
introduced a record 29 new products and we expect the full value of
these products to come to fruition over the next three years.
Revenue generated from new products this year was GBP12.0 million
(FY 2017: GBP11.1 million).
Good progress has been made in the areas which have been
identified as offering the highest growth potential for our
photonic technologies.
Microelectronic manufacturing is entering a new phase of ultra
fast lasers, which allow for improved capabilities in existing
areas of use and new areas, such as via drilling techniques and
extreme UV lithography, which is utilised in the production of
nanoelectronics. The next generation of precision lasers and laser
systems are being developed with our laser manufacturer and laser
system partners.
We have capitalised on our expertise and knowledge gained on
space laser communications to provide solutions for applications
such as harsh environment sensing which utilises our ruggedised
photonic technologies. Two recent examples are projects in the
areas of oil pipeline security and LIDAR wind detection for wind
farms.
Unmanned aerial vehicles have a variety of commercial and
military uses and this is an area where we see significant
potential for G&H. We design, engineer and manufacture bespoke
complex optical arrays, often in the IR spectrum, that form part of
the imaging system contained in the UAV's gimbal. They typically
provide targeting, surveillance and LIDAR capability.
Our space communication group has gone from strength to strength
with European and UK space agency funded work as well as
substantial commercial contracts to provide satellite communication
systems for near term satellite launches. We believe there is
significant potential to expand this technology into small
satellite platforms for constellations and near space UAVs.
We have a number of ongoing R&D defence programmes in the US
and Europe, which operate under ITAR regulations or confidentiality
agreements, supporting future growth in what is now a substantial
A&D business.
Our optical coherence tomography ("OCT") technology dominates
the retinal scanning and imaging arena. The longer term development
partnerships we have with medical diagnostic companies in the areas
of cardiovascular disease and cancer detection are now moving to
the prototype and early commercial model stage, with the prospect
of new product launches in the near future.
Performance improvement programme
We have built on the work done in previous years to improve
efficiency, customer service and to establish a more scalable
organisational model for future growth. During FY 2018 eight of our
sites were organised into three manufacturing centres. They are
based on our sites' areas of technical expertise, namely Acousto
Optic/ Electro Optic, Precision Optics and Fibre Optics. Each
manufacturing centre has a leader and their role is to ensure best
practice is shared, there is process harmonisation and optimal
allocation of resource.
Kent Periscopes and StingRay Optics will form a fourth
manufacturing centre, called Systems, in the new financial year.
This will represent the next stage of assimilation of these
relatively recent acquisitions into G&H.
The two latest acquisitions, ITL and GFO, will, in time, slot
into the Systems and Fibre Optic manufacturing centres,
respectively.
In FY 2019 we will introduce three customer facing business
units, which will mirror our traditional market sectors of
Industrials, A&D and Life Sciences / Biophotonics. Each of the
business units will have a leader who will be responsible for the
sector's strategy and longer term planning. They will work closely
with the four manufacturing heads to ensure our production
resources match the strategy and longer term planning.
This new approach will be underpinned by improved business
systems. In the new financial year we will enter the second year of
a phased introduction of new financial and business systems.
Markets and Applications
Industrial - 58.4% of FY18 revenue
The industrial division is composed of a diverse range of
industrial applications aligned to our world class photonic
technologies, including microelectronic manufacturing,
semiconductor manufacturing and test, remote sensing, metrology and
optical communications.
Our industrials division grew by GBP5.3 million or 7.8% compared
to the previous year. For reporting purposes scientific research is
now contained within the industrial sector, which is consistent
with the previously discussed business units. Scientific research
is a small, but prestigious and profitable area for G&H.
The two traditionally largest areas of the industrial division,
industrial lasers and high reliability fused fibre products for
undersea cables, performed very differently during FY 2018.
There was an unprecedented level of demand for critical
components in precision lasers used for microelectronic
manufacturing. This demand was driven, in large part, by the next
generation of smart phones and tablets and the change in
manufacturing technology required to make them. The technology is
dependent on the latest solid state lasers being able to deliver a
high level of precision. We worked closely with the laser
manufacturers and laser system suppliers to meet demand and have,
through a combination of investment and reorganisation of
resources, made available substantial extra capacity for these
products going forward.
The ongoing need for ever more data from government, industry
and the consumer continues to drive a need for more
telecommunication capacity. This is especially true for undersea
cable networks where well-capitalised 'Silicon Valley' technology
companies are sponsoring installation of their own dedicated
hardware. Our ultra high- reliability fused fibre products are used
in repeaters that are a key part of the undersea cable
networks.
Our business in high- reliability fused fibre products
underperformed in the year. This was due to delays in deployment of
planned undersea networks in the first half of the year. The
business though came back strongly in the latter part of the year,
as the planned networks moved into their deployment phase and we
have experienced good demand led growth for hi- reliability fused
fibre products, with a robust order book, as at 30 September
2018.
Aerospace & Defence - 32.7% of FY18 Group Revenue
A&D grew year on year by GBP5.9 million or 17.0%. This was
due to a combination of organic growth and the full year impact of
the StingRay Optics acquisition.
G&H is now able to bring a wide range of photonic
capabilities together that very much represent the "direction of
travel" in this sector. These include target designation, range
finding, ring laser and fibre optic gyroscopic navigational
systems, infra-red and RF counter measures, periscopes and sighting
systems for armoured vehicles and opto-mechanical sub systems for
unmanned aerial vehicles.
The acquisition of GFO provides enhanced access for our fibre
based business to tier one US A&D companies.
Delivering product quality, reliability and performance in
challenging environments is essential in the A&D arena and this
very much plays to G&H's strengths. Our customers encompass the
major US and European A&D companies.
Space satellite communication is undergoing a technological
revolution. The use of fibre optic lasers to transmit information
means satellite communication systems are more efficient and
robust, as well as being significantly lighter. This has changed
the economics of the sector and has led to smaller satellites and
encouraged the move towards the use of satellite constellations and
near space UAVs, as part of a communications network. The
investment we have made in this segment allows us to contribute at
the forefront of these developments globally.
Our Moorpark site, which has historically been profitable,
remains key to our aerospace and defence business. However, it has
recently struggled to grow its business during some difficult times
in the commercial aerospace sector which has seen price pressure
from a key customer. Whilst recent investment, improvements in the
site's operational set up, the adoption of LEAN manufacturing
principles, and diversification of its customer base are moving the
site in a favourable direction, an impairment of GBP2.7m has been
recognised in respect of the carrying value of the goodwill
relating to this site.
Life Sciences / Biophotonics - 8.9% of FY18 Group Revenue
Life sciences / biophotonics revenue grew year on year by GBP1.6
million or 17.2%.
The principal applications are in OCT, laser surgery and
microscopy. OCT is widely used in ophthalmology for 3D retinal
scanning and G&H has a dominant position in supplying critical
components and sub systems to the main equipment suppliers. We also
have a number of R&D collaborations with medical diagnostic
companies in cardiovascular and cancer detection.
Laser surgery is a fast growing segment particularly in
ophthalmology, prostate and cosmetic surgery and has significant
potential to be exploited beyond these current areas of use.
The acquisition of ITL, in August 2018, has the potential to be
transformative for G&H in this sector. It will double the life
science / biophotonics revenue and their greater electronic,
software and mechanical engineering capability will substantially
enhance our ability to present our photonic technology as part of a
sub- system or system to our medical diagnostic customers.
There is potential for photonic technology to be used in
minimally invasive surgery, endoscopy and robotic surgery and this
segment remains an area where G&H will continue to invest in
R&D and to look for further strategic acquisitions.
Appointment of Non-Executive Chairman and CFO succession
In December 2017 we announced that Gary Bullard was to be
appointed to the Board at the Annual General Meeting in February
2018. He was duly appointed and has had a successful period in the
post.
Gareth Jones stepped down as Non- Executive Chairman after 37
years of loyal service with the Company. On behalf of myself and
G&H, I would like to thank Gareth for his wisdom and guidance
as Chairman and for his immense contribution to G&H's growth as
a business over many years. All his friends and colleagues at the
Company wish him well in the future.
After more than 10 years as CFO and some 12 years in G&H,
Andy Boteler has decided to step down as a public company
executive. Andy has been an important part of G&H's success
over many years and his deep knowledge of the business, energy and
considerable ability will be missed. Everyone at G&H wishes him
well in his future endeavours. As part of a managed succession
process, a specialist recruitment agency has been appointed. Andy
has committed to stay on until we have a successor in place.
Outlook
G&H has had another good year. We were able to take
advantage of generally positive market conditions and meet our
financial goals. At the same time we made substantial investments
in people, process and "best in class" equipment in order to
increase capacity in industrial and medical lasers, invested in
R&D projects identified as delivering a high return for our
photonic technologies and brought on board complementary new
technologies and customers through acquisitions. Considerable
progress was made towards our strategic goals of diversification
and moving up the value chain.
We will continue an active policy towards creating a more
diverse and balanced business by building "critical mass" in
A&D and life sciences / biophotonics, through a mix of
investment in R&D and acquisitions.
G&H is committed to making further investment in R&D in
target areas that we believe represent the highest growth potential
for our photonic technologies. These include the latest industrial
laser systems, harsh environment sensing, UAVs, novel A&D
programmes, space satellite communications, laser surgery and
medical diagnostics.
We will continue to execute on our performance management
programme with the aim of improving operational efficiency,
customer service and putting in place a scalable organisational
model that will provide a platform for future growth. The
introduction, in FY 2019, of the fourth manufacturing centre, based
around systems and three customer facing business units, will be
the next step in this process.
There has been some recent gradual softening in demand growth
for critical components used in microelectronic manufacturing,
offset by a return to strong demand growth for our fibre optics
business generally and hi-reliability fibre couplers in
particular.
We remain aware of the current potential macroeconomic and
political risks. Overall G&H has a robust order book, combined
with greater diversification. The Board remains confident that the
Company is well positioned to deliver further progress in FY 2019
and beyond.
Mark Webster
Chief Executive Officer
27 November 2018
Performance Overview
The business has once again delivered strong and profitable
growth.
Group revenue for the year was a record GBP124.9 million. This
represents an increase of GBP12.9 million, or 11.5% over the
previous year of GBP112.0 million.
In August and September 2018 Gooch & Housego acquired ITL
and the trade and assets of Gould Fiber Optics respectively, which
combined, contributed GBP2.5 million to group revenue in the year.
Additionally, the full year incremental benefit of our 2017
acquisition, StingRay Optics LLC, was GBP3.0m.
In September 2018, G&H sold the majority of the trade and
assets of its Orlando, Florida facility. In FY 2018 the Orlando
business contributed GBP5.0 million to Group revenue with marginal
profitability. The cost of closing the site, net of disposals
proceeds was GBP1.6m.
Our organic revenue, net of acquisitions and disposals, was up
by 6.6%. Excluding foreign exchange and acquisitions / disposals
revenue growth was 11.1%, a higher rate of growth than the previous
year.
During 2018, G&H invested GBP6.0 million in property, plant
and equipment and GBP24.0 million in acquisitions. This has
resulted in the business moving into a net debt position of GBP10.6
million as at 30 September 2018 compared to a net cash position of
GBP14.9 million, as at 30 September 2017. This represents
approximately 0.5 X EBITDA.
REVENUE
---------------------------------------- ------ -------- --------
2018 2017
---------------- ------------------
Year ended 30 September GBP'000 % GBP'000 %
------------------------------ -------- ------ -------- ------
Industrial 72,881 58.4% 67,586 60.4%
------------------------------ -------- ------ -------- ------
Aerospace & Defence 40,789 32.7% 34,860 31.1%
------------------------------ -------- ------ -------- ------
Life Sciences / biophotonics 11,213 8.9% 9,570 8.5%
------------------------------ -------- ------ -------- ------
Group Revenue 124,883 100% 112,016 100%
------------------------------ -------- ------ -------- ------
In the financial year under review, adjusted operating profits
increased by GBP2.7 million to GBP19.1 million (2017: GBP16.4
million). At a percentage margin level, adjusted operating margins
were 15.3%, compared to 14.6% in 2017.
In our Industrial segment, revenue grew by 7.8%, in absolute
terms, from GBP67.6 million last year to GBP72.9 million this year.
On a constant currency basis this sector increased by 12.6%.
Revenue in our aerospace & defence business increased by
17.0% in absolute terms from GBP34.9 million to GBP40.8 million.
Excluding the acquisition of Gould Fiber Optics and the full year
impact of our 2017 acquisition, A&D revenue increased by 7.7%.
Excluding foreign exchange and acquisitions / disposals this sector
increased by 12.0% in the year.
Life sciences / biophotonics revenue increased by 17.2% in
absolute terms from GBP9.6 million to GBP11.2 million. Excluding
the acquisition of ITL, life science / biophotonics revenue fell by
6.2%. Excluding foreign exchange and acquisitions / disposals this
sector was broadly flat year on year.
GROUP EARNINGS PERFORMANCE
----------------------------------- -------- -------- ----------
All amounts in GBP'000 Adjusted Reported
--------------------
Year ended 30 September 2018 2017 2018 2017
------------------------- -------- -------- -------- --------
Operating profit 19,100 16,406 10,796 13,278
------------------------- -------- -------- -------- --------
Net finance costs (343) (295) (683) (676)
------------------------- -------- -------- -------- --------
Profit before taxation 18,757 16,111 10,113 12,602
------------------------- -------- -------- -------- --------
Taxation (4,677) (4,059) (2,893) (3,710)
------------------------- -------- -------- -------- --------
Profit for the year 14,080 12,052 7,220 8,892
Basic earnings per
share (p) 57.2p 49.4p 29.3p 36.4p
------------------------- -------- -------- -------- --------
The Group adjusted profit before tax amounted to GBP18.8 million
(2017: GBP16.1 million) and represented a margin of 15.0%.
Statutory profit before tax was GBP10.1 million compared with
GBP12.6 million last year.
The adjusted effective rate of tax was 24.9% (2017: 25.2%). The
reduction in the rate was due to US tax reforms, offset to a large
extent by a greater proportion of the group's profits being subject
to state taxes in the US. The effective rate of tax of 28.6% (2017:
29.4%) was higher than the adjusted effective rate because of the
effect of the goodwill impairment, which is not subject to tax, and
which was partially offset by the one-off gain on re-measurement of
the US deferred tax liabilities following the reduction of the US
tax rate.
The rate reflects a combination of the varying tax rates
applicable throughout the countries in which the Group operates,
principally the UK and the USA.
Adjusted earnings per share (EPS) increased from 49.4p in FY2017
to 57.2p in FY2018. Reported basic EPS was 29.3p compared with
36.4p last year.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating Net finance Taxation Earnings
profit costs per share
------------------------- ------------------ ------------------ ------------------ ----------------
Year ended 30 2018 2017 2018 2017 2018 2017 2018 2017
September GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Reported 10,796 13,278 (683) (676) (2,893) (3,710) 29.3p 36.4p
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Amortisation
of acquired
intangible assets 2,141 2,202 - - (276) (168) 7.6p 8.3p
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Site closure 1,569 - - - (359) - 4.9p -
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Impairment of
goodwill 2,708 615 - - - - 11.0p 2.5p
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Charge / (credit)
in respect of
accrued contingent
consideration 417 (615) - - - - 1.7p (2.5p)
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Restructuring
costs 864 536 - - (169) (105) 2.8p 1.8p
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Transaction
fees 605 390 - - (116) (76) 2.0p 1.3p
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Interest on
deferred consideration - - 340 381 - - 1.4p 1.6p
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Tax credit on
US deferred
tax due to rate
change - - - - (864) - (3.5p) -
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted 19,100 16,406 (343) (295) (4,677) (4,059) 57.2p 49.4p
------------------------- -------- -------- -------- -------- -------- -------- ------- -------
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, costs associated
with restructuring activities, impairment of goodwill, adjustments
to contingent consideration, costs associated with the acquisition
and disposal of subsidiary companies, and the interest charge on
deferred consideration.
RESEARCH & DEVELOPMENT (R&D)
Gooch & Housego continues to invest in R&D and regards
this as fundamental to the continued growth of the company. There
were a record 29 product releases in 2018, together with 4 new
patents granted.
Expenditure on R&D in FY2018 increased by 2.4% from GBP8.6
million to GBP8.8 million. R&D expenditure represented 7.1% of
revenue (2017: 7.7%). The Group capitalised GBP0.6m of development
expenditure (2017: GBP0.7 million).
OPERATIONS
In September 2018 G&H shut down its Orlando, Florida, light
measurement business. Most of the trade and assets of the business
have been sold. It was a non-core business and in the recent past
had delivered marginal returns. This business made a small loss in
FY 2018. The cost of closing this facility, net of the sale of the
majority of the trade & assets is GBP1.6 million in 2018. The
Orlando property is owned by G&H and is being marketed for sale
in FY2019. It is expected that following the sale of the property,
the overall site closure will be cash neutral. Both the closure
costs and any future profit on sale of the building will be treated
as adjusting items.
As reported in 2017, the Company won its legal dispute with the
landlord of its Fremont facility, as a result of which, a
Californian court awarded G&H in the region of $2 million in
damages plus costs, arising from the landlord's non-performance in
respect of the lease. The landlord has commenced an appeal against
this ruling and whilst legal opinion remains confident that the
original ruling will be upheld, no recognition of the damages award
has been made in this set of financial statements. Any net benefit
will be treated as an exceptional item.
As part of the plan to position G&H for future growth the
business is in the process of being reorganised. As outlined in our
FY2017 Annual Report, our manufacturing sites have been organised
into manufacturing centres. In addition to the three areas of
technical expertise, namely Acousto Optic / Electro Optic,
Precision Optics and Fibre Optics announced in FY2017, G&H is
also adding Systems as the fourth manufacturing centre, announced
in FY2018. Each manufacturing area has a leader and their role is
to ensure best practice is shared, there is process harmonisation
and optimal allocation of resources. In FY2018 the business has
also announced three business units that mirror our traditional
market sectors of Industrial, A&D and Life Sciences /
Biophotonics. These business units will provide a market facing
focus, tailored to the specific needs of these discrete and often
very diverse market sectors. The fourth manufacturing centre and
the three new business units will be introduced in the new
financial year.
ACQUISITIONS
G&H 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, G&H is now focussing on moving up the value chain in
each of those markets. Whilst the business will continue to
evaluate bolt on businesses in our core component technologies,
continued strong focus is being placed on acquisition opportunities
that enhance the Company's ability to wrap electronics and software
around core photonic products to yield system-level solutions.
In August 2018 G&H acquired ITL. This acquisition expands
the Company's presence in the life sciences sector and further
enables G&H's move into system based products.
Founded in 1977, ITL is a UK based specialist in the design,
development and manufacture of high quality medical and in vitro
diagnostic (IVD) devices. ITL is a market leading supplier with an
established group of long standing multi-national customers. It
provides full product development, design, manufacturing and after
sale service for the commercialisation of medical diagnostic,
analytical, precision electro-mechanical and laboratory
instruments.
ITL is headquartered in Ashford, Kent, with manufacturing sites
in Ashford and Shanghai, China, plus a US client servicing
capability based in Virginia, USA. This acquisition enables G&H
to take a significant step towards meeting its strategic
objectives, including doubling the revenue of its life science
business and accelerating the Company's move up the value chain,
with all of ITL's sales coming from system based products. ITL's
core group of electronic, software and mechanical engineers,
provides an enhanced platform on which G&H can expand its
systems capabilities.
Over time there are a number of potential benefits that will
accrue from ITL becoming part of G&H. These include leveraging
G&H's commercial footprint in the US, China and Far East and
combining the Company's photonic expertise with ITL's high level
systems capability in order to provide a more attractive product
offering to G&H's medical diagnostic customer base.
Acquired in quarter 4, ITL has performed well, contributing
GBP2.2 million to group revenue and GBP0.5 million in profit before
tax in the year.
In September 2018 G&H acquired the trade and assets of Gould
Technology LLC, trading as Gould Fiber Optics. This acquisition
strengthens G&H's position as the world leader in fused fibre
optic technology and provides enhanced access to strategic US
aerospace and defence customers.
Founded in 1978 and headquartered in Baltimore, MD, USA, GFO is
a specialist in the design, development and manufacture of fibre
optic components and sub systems. GFO is a market leading supplier
of key enabling components into tier 1 US Aerospace and Defence
customers. The GFO product range is highly complementary to that of
G&H. Whilst G&H is the leading manufacturer of high
reliability undersea fused fibre optic components, together with a
strong presence in the life sciences and fibre laser markets, GFO
specialises in the supply of polarisation maintaining ("PM") fibre
components to the US defence market.
As GFO was acquired very late in the financial year its
contribution to the 2018 results has been minimal, adding circa
GBP0.3 million to group revenue and a marginal contribution to
profit.
This acquisition enables G&H to take another step towards
meeting its strategic objective of further diversification in its
core markets. GFO brings the technology and routes to market
required for G&H to access the US aerospace and defence fibre
optic market. In turn G&H's much larger US salesforce/ business
development group and the combined broader based product portfolio
should provide the platform for greater expansion within this
sector.
As a result of an excellent trading performance in 2018, Kent
Periscopes has substantially achieved its full earn out potential.
Consequently, the provision for a proportion of this payment
previously released in 2017, has been charged to the income
statement for the current year.
NON TRADING ITEMS
Restructuring costs of GBP0.9 million (FY2017: GBP0.5 million)
related to the legal dispute associated with the re-location of our
Palo Alto facility to Fremont and to restructuring costs arising
from the re-organisation of the manufacturing centres and the
introduction of the customer facing business units.
Transaction costs of GBP0.6 million relate to the acquisition of
ITL and Gould Fiber Optics.
Site closure costs relate to the closure of the Company's
Orlando facility. These comprise inventory write off costs and
personnel expenses, net of the proceeds received.
Provision of contingent consideration of GBP0.4 million related
to the Kent Periscopes acquisition meeting its full earn-out.
As part of its annual review of the carrying value of goodwill,
the Board has taken the decision to impair the goodwill of the
General Optics acquisition. General Optics, now referred to as
Gooch & Housego Moorpark, was acquired in October 2008 for a
consideration of $21m and, prior to the impairment, the carrying
value of the associated goodwill was GBP6.4m. Over the last ten
years this acquisition has played a vital role in Gooch &
Housego's diversification strategy, by providing the knowledge and
routes to market required for the Group to become a credible player
in the Aerospace and Defence market. However, on a stand-alone
basis, Moorpark has recently struggled to grow its business during
some difficult times in the commercial aerospace sector which has
seen price pressure from a key customer. Whilst recent improvements
in the site's operational set up, the adoption of LEAN
manufacturing principles, and diversification of its customer base,
are moving the performance of Moorpark in a favourable direction,
an impairment charge of GBP2.7m has been recognised in relation to
the carrying value of the Moorpark goodwill.
BALANCE SHEET
The Group's total equity at the end of the year was GBP107.8
million, an increase of GBP9.7 million over the prior year. This
increase comprised GBP4.6m from retained earnings, GBP2.7m from
issues of share capital and a net increase of GBP2.4m from foreign
exchange and other movements.
Additions to property, plant and equipment totalled GBP6.0m
(excluding acquisitions). The main additions related to investment
in plant and machinery to deliver the capacity requirements in
2018.
Working capital was 27.4% of revenue in the current year
compared to 19.2% in 2017, due to higher inventory levels required
to cope with the volume increase and a heavy weighting of shipments
towards the end of the financial year driving up accounts
receivable. This metric has also been affected by the two
acquisitions and one site closure in the later part of the year.
Excluding these the working capital was 24.6%.
Inventory at year end was GBP24.4 million, an increase of GBP3.4
million over the prior year. Excluding the impact of the inventory
attributable to the acquisitions and site closure, the underlying
inventory increased by GBP2.3 million, or 10.7%, in the year. This
increase is reflective of the increased activity in the year.
Trade receivables at year end were GBP32.2 million, an increase
of GBP11.7 million over the prior year. Excluding the impact
attributable to the acquisitions and site closure, the underlying
receivables increased by GBP8.7 million, or 42.6%, in the year.
This increase was due a heavier than normal weighting of shipments
in Q4. There has been good cash collection post year end.
Cash balances at 30 September 2018 were GBP19.4 million,
compared with GBP26.4 million in the prior year. Net cash flows
from operating activities totalled GBP9.2 million, compared with
GBP17.6 million last year, reflecting a cash generated from
operations to adjusted operating profit rate of 62.6% (2017: 119%)
as a result of the increase in the working capital position. During
the year the business moved from a net cash position of GBP14.9
million to a net debt position of GBP10.6 million, as a result of
investing GBP24.0 million in the acquisitions and GBP6.0m in
property, plant and equipment.
In August 2018 G&H re-financed its banking facilities with
its existing bankers, Natwest. The new arrangement, set for a three
year term, comprises a committed $40 million revolving credit
facility and an uncommitted $20 million accordion facility.
MOVEMENT IN NET CASH / (DEBT)
All amounts in GBPm Gross Gross Net
Cash Debt Cash/ (Debt)
----------------------------- ------- ------- --------------
At 1 October 2017 26.4 (11.5) 14.9
Operating cash flows 20.7 - 20.7
Debt drawdown 17.3 (17.3) -
Acquisitions / (disposals) (23.6) (0.4) (24.0)
Net capital expenditure (7.2) - (7.2)
Working capital (8.8) - (8.8)
Interest, tax and dividends (5.7) - (5.7)
Exchange movement 0.3 (0.8) (0.5)
----------------------------- ------- ------- --------------
At 30 September 2018 19.4 (30.0) (10.6)
----------------------------- ------- ------- --------------
ORDER BOOK
As at 30 September 2018, the Group order book stood at GBP96.1
million, compared to GBP72.1 million at the end of the 2017
financial year, a 33% increase. The net effect of the acquisitions
and disposal added GBP10.3 million to the order book. Excluding
foreign exchange and acquisitions / disposals the order book was
17% higher. The book to bill ratio for the business as a whole was
0.95 (six month rolling average) as at 30 September 2018 (2017:
1.08). This partly reflects the strong shipments in Q4.
STAFF
The Group workforce increased from 823 at 30 September 2017 to
1,007 at the end of September 2018, an increase of 184. This is a
net position and therefore reflects both the work the business has
done in driving efficiency improvements and the additional
headcount that has come from the recent acquisitions and investment
in capacity.
DIVIDS
The Directors propose a final dividend of 7.1p per share making
a total dividend per share for the year of 11.3p (2017: 10.2p), an
increase of 10.8%. The final dividend, if approved, will be payable
on 1 March 2019 to shareholders on the Company's share register as
at the close of business on 25 January 2019.
KEY PERFORMANCE INDICATORS (KPIs)
The Group 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.
In striving to achieve these strategic objectives, the main
financial performance measures monitored by the Board are:
Total revenue growth 2018 2017 2016
At actual exchange rates 12% 30% 9%
----- ----- -----
At constant exchange rates 16% 19% 3%
----- ----- -----
The Board is focused on driving revenue growth by investing both
organically and through acquisitions. The Group business has
delivered strong underlying growth.
Target market revenue 2018 2017 2016
Aerospace & Defence (GBPm) 40.8 34.9 20.0
----- ----- -----
Life Sciences (GBPm) 11.2 9.6 7.9
----- ----- -----
The Group targeted markets of Aerospace & Defence and Life
Sciences provide a route to sustainable growth, and a more
diversified revenue base. These markets also provide 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 increase in A&D revenue includes the full year
effect of last year's acquisition, StingRay Optics LLC, combined
with a small contribution from Gould Fiber Optics in 2018.
Net (debt) / cash analysis 2018 2017 2016
Net (debt) / cash (GBPm) (10.6) 14.9 11.7
------- ----- -----
In order to balance business risk with the investment needs of
the Company, management closely monitors and manages net
cash/(debt). This year, following the acquisition of ITL and Gould
Fiber Optics and the investment in capital assets the net cash
reduced from a net cash position of GBP14.9 million to a net debt
position of GBP10.6 million. This represents a Net Debt : EBITDA
ratio of c. 0.5.
Earnings per share (EPS) 2018 2017 2016
Adjusted diluted EPS (pence) 56.5p 48.5p 41.7p
------ ------ ------
As a result of a strong trading performance, the business has
been able to deliver growth in adjusted diluted EPS of 16.5%, from
48.5p to 56.5p in 2018.
Group Income Statement
For the year ended 30 September 2018 (unaudited)
2018 2017
Note GBP000 GBP000
--------- ---------
Revenue 2 124,883 112,016
Cost of revenue (74,811) (65,937)
--------- ---------
Gross profit 50,072 46,079
Research and Development (8,229) (8,119)
Sales and Marketing (9,237) (9,459)
Administration (22,317) (16,937)
Other income and expenses 507 1,714
--------- ---------
Operating profit 2 10,796 13,278
Finance income 16 27
Finance costs (699) (703)
--------- ---------
Profit before income tax expense 10,113 12,602
Income tax expense 3 (2,893) (3,710)
--------- ---------
Profit for the year 7,220 8,892
--------- ---------
Basic earnings per share 4 29.3p 36.4p
Diluted earnings per share 4 29.0p 35.8p
--------- ---------
Reconciliation of profit before tax to adjusted profit before
tax:
2018 2017
GBP000 GBP000
------- -------
Profit before tax 10,113 12,602
Amortisation of acquired intangible
assets 2,141 2,202
Charge / (release) re accrued contingent
consideration 417 (615)
Impairment of goodwill 2,708 615
Site closure costs 1,569 -
Restructuring costs 864 536
Transaction fees 605 390
Interest on discounted deferred
consideration 340 381
------- -------
Adjusted profit before tax 18,757 16,111
------- -------
Group Balance Sheet
For the year ended 30 September 2018 (unaudited)
2018 2017
Note GBP000 GBP000
--------- ---------
Non-current assets
Property, plant and equipment 38,320 33,890
Intangible assets 65,734 40,250
Deferred income tax assets 1,944 2,703
--------- ---------
105,998 76,843
Current assets
Inventories 24,445 21,078
Income tax assets - 267
Trade and other receivables 35,028 24,723
Cash and cash equivalents 19,433 26,425
78,906 72,493
Current liabilities
Trade and other payables (25,262) (23,758)
Borrowings (75) (6)
Income tax liabilities (309) (579)
Provision for other liabilities
and charges (988) (888)
Deferred consideration (5,774) (4,286)
--------- ---------
(32,408) (29,517)
Net current assets 46,498 42,976
Non-current liabilities
Borrowings (29,964) (11,492)
Deferred income tax liabilities (6,322) (5,938)
Deferred consideration (8,363) (4,253)
(44,649) (21,683)
Net assets 107,847 98,136
--------- ---------
Shareholders' equity
Capital and reserves
attributable to equity shareholders
Called up share capital 4,982 4,903
Share premium account 15,530 15,530
Merger reserve 7,262 4,640
Cumulative translation reserve 7,231 5,574
Retained earnings 72,842 67,489
--------- ---------
Total equity 107,847 98,136
--------- ---------
Group Statement of Changes in Shareholders' Equity
For the year ended 30 September 2018 (unaudited)
Note Called Share Cumulative
up share premium Merger Retained translation Total
capital account reserve earnings reserve equity
GBP000 GBP000 GBP000 GBP000 GBP'000 GBP000
----------- ---------- ---------- ----------- -------------- ---------
At 1 October 2016 4,852 15,530 2,671 60,135 6,984 90,172
Profit for the
financial
year - - - 8,892 - 8,892
Other comprehensive
expense for the year - - - - (1,410) (1,410)
----------- ---------- ---------- ----------- -------------- ---------
Total comprehensive
income for the year - - - 8,892 (1,410) 7,482
----------- ---------- ---------- ----------- -------------- ---------
Dividends 5 - - - (2,289) - (2,289)
Shares issued 51 - 1,969 (15) - 2,005
Fair value of
employee
services - - - 587 - 587
Tax credit relating
to share option
schemes - - - 179 - 179
Total contributions
by and distributions
to owners of the
parent recognised
directly in equity 51 - 1,969 (1,538) - 482
At 30 September 2017 4,903 15,530 4,640 67,489 5,574 98,136
At 1 October 2017 4,903 15,530 4,640 67,489 5,574 98,136
Profit for the
financial
year - - - 7,220 - 7,220
Other comprehensive
income for the year - - - - 1,657 1,657
----------- ---------- ---------- ----------- -------------- ---------
Total comprehensive
income for the year - - - 7,220 1,657 8,877
----------- ---------- ---------- ----------- -------------- ---------
Dividends 5 - - - (2,647) - (2,647)
Shares issued 79 - 2,622 (45) - 2,656
Fair value of
employee
services - - - 675 - 675
Tax credit relating
to share option
schemes - - - 150 - 150
Total contributions
by and distributions
to owners of the
parent recognised
directly in equity 79 - 2,622 (1,867) - 834
At 30 September 2018 4,982 15,530 7,262 72,842 7,231 107,847
----------- ---------- ---------- ----------- -------------- ---------
Group Statement of Comprehensive Income
For the year ended 30 September 2018 (unaudited)
2018 2017
Note GBP000 GBP000
------- --------
Profit for the year 7,220 8,892
Other comprehensive income / (expense)
- items that may be reclassified
subsequently to profit or loss
Currency translation differences 1,657 (1,410)
Other comprehensive income / (expense)
for the year net of tax 1,657 (1,410)
Total comprehensive income for the
year attributable to the shareholders
of Gooch & Housego PLC 8,877 7,482
------- --------
Group Cash Flow Statement
For the year ended 30 September 2018 (unaudited)
2018 2017
GBP000 GBP000
--------- ---------
Cash flows from operating activities 6
Cash generated from operations 11,949 19,526
Income tax paid (2,779) (1,957)
--------- ---------
Net cash generated from operating
activities 9,170 17,569
--------- ---------
Cash flows from investing activities
Acquisition of subsidiaries, net
of cash acquired (24,029) (5,658)
Disposal of trade and assets 384 -
Purchase of property, plant and
equipment (5,849) (5,799)
Sale of property, plant and equipment - 29
Purchase of intangible assets (1,377) (604)
Interest received 9 27
Interest paid (304) (326)
--------- ---------
Net cash used in investing activities (31,166) (12,331)
--------- ---------
Cash flows from financing activities
Drawdown of borrowings 17,272 5,918
Repayment of borrowings (16) (5,523)
Dividends paid to ordinary shareholders (2,647) (2,289)
Net cash generated from / (used
in) financing activities 14,609 (1,894)
--------- ---------
Net (decrease) / increase in cash (7,387) 3,344
Cash at beginning of the year 26,425 23,167
Exchange gains / (losses) on cash 395 (86)
--------- ---------
Cash at the end of the year 19,433 26,425
--------- ---------
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 2018.
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 2017 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 2017,
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
27 November 2018. 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 Company's segmental reporting reflects the information that
management uses within the business. The business is divided into
three market sectors, being Aerospace & Defence, Life Sciences
/ Biophotonics and Industrial, together with the Corporate cost
centre.
The industrial business segment primarily comprises the
industrial laser market for use in the semiconductor and
microelectronic industries, but also includes other industrial
applications such as metrology and telecommunications. The
Scientific Research sector, which covers academic and government
funded research including major multi-national projects, was merged
with the Industrial sector in the year.
Aerospace Life Sciences
& Defence / Bio-photonics Industrial Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000
For year ended 30
September 2018
-------------------------- ----------- -----------------
Revenue
Total revenue 41,023 11,440 80,363 - 132,826
Inter and intra-division (234) (227) (7,482) - (7,943)
-------------------------- ----------- ----------------- ----------- ---------- ----------
External revenue 40,789 11,213 72,881 - 124,883
Divisional expenses (34,454) (9,189) (59,146) (1,757) (104,546)
-------------------------- ----------- ----------------- ----------- ---------- ----------
EBITDA(1) 6,335 2,024 13,735 (1,757) 20,337
-------------------------- ----------- ----------------- ----------- ---------- ----------
EBITDA % 15.5% 18.1% 18.8% - 16.3%
Depreciation and
amortisation (758) (399) (2,450) (1,085) (4,692)
-------------------------- ----------- ----------------- ----------- ---------- ----------
Operating profit
before amortisation
of acquired intangible
assets and goodwill
impairment 5,577 1,625 11,285 (2,842) 15,645
Amortisation of acquired
intangible assets
and goodwill impairment - - - (4,849) (4,849)
-------------------------- ----------- ----------------- ----------- ---------- ----------
Operating profit 5,577 1,625 11,285 (7,691) 10,796
-------------------------- ----------- ----------------- ----------- ---------- ----------
Operating profit
margin % 13.7% 14.5% 15.5% - 8.6%
-------------------------- ----------- ----------------- ----------- ---------- ----------
Add back non-recurring
items, amortisation
of acquired intangibles
and goodwill impairment 116 17 1,030 7,141 8,304
Adjusted operating
profit 5,693 1,642 12,315 (550) 19,100
-------------------------- ----------- ----------------- ----------- ---------- ----------
Adjusted profit margin
% 14.0% 14.6% 16.9% - 15.3%
-------------------------- ----------- ----------------- ----------- ---------- ----------
Finance costs - - - (683) (683)
-------------------------- ----------- ----------------- ----------- ---------- ----------
Profit before income
tax expense 5,577 1,625 11,285 (8,374) 10,113
-------------------------- ----------- ----------------- ----------- ---------- ----------
Aerospace Life Sciences
& Defence / Bio-Photonics Industrial Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000
For year ended 30
September 2017
----------------------------- ----------- -----------------
Revenue
Total revenue 34,860 9,570 74,661 - 119,091
Inter and intra-division - - (7,075) - (7,075)
----------------------------- ----------- ----------------- ----------- ---------- ---------
External revenue 34,860 9,570 67,586 - 112,016
Divisional expenses (29,880) (8,165) (53,238) (1,389) (92,672)
----------------------------- ----------- ----------------- ----------- ---------- ---------
EBITDA(1) 4,980 1,405 14,348 (1,389) 19,344
----------------------------- ----------- ----------------- ----------- ---------- ---------
EBITDA % 14.3% 14.7% 21.2% - 17.3%
Depreciation and
amortisation (715) (388) (2,136) (625) (3,864)
----------------------------- ----------- ----------------- ----------- ---------- ---------
Operating profit
before amortisation
of acquired intangible
assets 4,265 1,017 12,212 (2,014) 15,480
Amortisation of acquired
intangible assets,
gain on bargain purchase
and goodwill impairment - - - (2,202) (2,202)
----------------------------- ----------- ----------------- ----------- ---------- ---------
Operating profit 4,265 1,017 12,212 (4,216) 13,278
----------------------------- ----------- ----------------- ----------- ---------- ---------
Operating profit
margin % 12.2% 10.6% 18.1% - 11.9%
----------------------------- ----------- ----------------- ----------- ---------- ---------
Add back amortisation
of intangibles, impairment
of goodwill, and
non-recurring items - - - 3,128 3,128
Adjusted operating
profit 4,265 1,017 12,212 (1,088) 16,406
----------------------------- ----------- ----------------- ----------- ---------- ---------
Adjusted profit margin
% 12.2% 10.6% 18.1% - 14.6%
----------------------------- ----------- ----------------- ----------- ---------- ---------
Finance costs - - - (676) (676)
----------------------------- ----------- ----------------- ----------- ---------- ---------
Profit before income
tax expense 4,265 1,017 12,212 (4,892) 12,602
----------------------------- ----------- ----------------- ----------- ---------- ---------
(1)EBITDA = Earnings before interest, tax, depreciation and
amortisation
Management have added back the amortisation of intangibles,
impairment of goodwill, restructuring costs, site closure costs,
charge / release in respect of contingent consideration and
transaction fees in the above analysis. This has been shown because
the Directors consider the analysis to be more meaningful excluding
the impact of these non-recurring expenses.
All of the amounts recorded are in respect of continuing
operations.
Analysis of net assets by location:
2018 2018 2018 2017 2017 2017
Assets Liabilities Net Assets Assets Liabilities Net Assets
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------- ------------ ----------- -------- ------------ -----------
United Kingdom 93,311 (56,955) 36,356 75,104 (32,612) 42,492
USA 90,382 (19,999) 70,383 73,641 (18,477) 55,164
Continental
Europe 495 (42) 453 545 (98) 447
Asia Pacific 716 (61) 655 46 (13) 33
-------- ------------ ----------- -------- ------------ -----------
184,904 (77,057) 107,847 149,336 (51,200) 98,136
-------- ------------ ----------- -------- ------------ -----------
For the year to 30 September 2018 non-current asset additions
were GBP3.8m (2017: GBP1.9m) for the UK and for the USA GBP3.6m
(2017: GBP4.5m). There were no additions to non-current assets in
respect of Europe (2017: GBPnil) or the Asia Pacific region (2017:
GBPnil). The value of non-current assets in the USA was GBP62.4m
(2017: GBP47.9m), the United Kingdom GBP45.7m (2017: GBP29.0m) and
Europe GBPnil (2017: GBPnil). There were no non-current assets in
the Asia-Pacific region.
Analysis of revenue by destination:
2018 2017
GBP000 GBP000
-------- --------
United Kingdom 21,081 18,624
North America 44,899 45,485
Continental Europe 29,788 24,233
Asia Pacific and
Other 29,115 23,674
Total revenue 124,883 112,016
-------- --------
3. Income tax expense
Analysis of tax charge in the year
2018 2017
GBP000 GBP000
Current taxation
UK Corporation tax 1,895 1,318
Overseas tax 1,381 2,165
Adjustments in respect of prior
year tax charge - (1,315)
-------- --------
Total current tax 3,276 2,168
-------- --------
Deferred tax
Origination and reversal of temporary
differences 481 227
Adjustments in respect of prior
year deferred tax - 1,315
Impact of change in the US tax (864) -
rate
-------- --------
Total deferred tax (383) 1,542
Income tax expense per income
statement 2,893 3,710
-------- --------
4. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on
the profit for the year using as a divisor the weighted average
number of Ordinary Shares in issue during the year. The weighted
average number of shares for the year ended 30 September is given
below:
2018 2017
Number of shares used for basic earnings
per share 24,629,591 24,457,701
Dilutive shares 265,817 412,901
Number of shares used for dilutive
earnings per share 24,895,408 24,870,602
----------- -----------
A reconciliation of the earnings used in the earnings per share
calculation is set out below:
2018 2017
pence pence
GBP000 per share GBP000 per share
------- ----------- ------- -----------
Basic earnings per share 7,220 29.3p 8,892 36.4p
Amortisation of acquired intangible
assets (net of tax) 1,865 7.6p 2,034 8.3p
Goodwill impairment 2,708 11.0p 615 2.5p
Charge / (release) re accrued
contingent consideration 417 1.7p (615) (2.5p)
Site closure costs (net of
tax) 1,210 4.9p - -
Restructuring costs (net of
tax) 695 2.8p 431 1.8p
Transaction fees (net of tax) 489 2.0p 314 1.3p
Interest on deferred consideration 340 1.4p 381 1.6p
One off credit due to US tax
rate change (864) (3.5p) - -
------- ----------- ------- -----------
Total adjustments net of income
tax expense 6,860 27.9p 3,160 13.0p
------- ----------- ------- -----------
Adjusted basic earnings per
share 14,080 57.2p 12,052 49.4p
------- ----------- ------- -----------
Basic diluted earnings per
share 7,220 29.0p 8,892 35.8p
------- ----------- ------- -----------
Adjusted diluted earnings
per share 14,080 56.5p 12,052 48.5p
------- ----------- ------- -----------
Basic and diluted earnings per share before amortisation and
other adjustments has been shown because, in the opinion of the
Directors, it provides a useful measure of the trading performance
of the Group.
5. Dividends
2018 2017
GBP000 GBP000
-------- --------
Final 2017 dividend paid in 2018:
6.5p per share (Final 2016 dividend
paid in 2017: 5.7p per share) 1,608 1,383
2018 Interim dividend paid: 4.2p
per share (2017: 3.7p) 1,039 906
-------- --------
2,647 2,289
-------- --------
The Directors propose a final dividend of 7.1p per share making
the total dividend paid and proposed in respect of the 2018
financial year 11.3p (2017: 10.2p).
6. Cash generated from operating activities
Reconciliation of cash generated
from operations
2018 2017
GBP000 GBP000
-------- --------
Profit before income tax 10,113 12,602
Adjustments for:
- Amortisation of acquired intangible
assets 2,141 2,202
- Amortisation of other intangible
assets 683 199
- Proceeds from sale of trade and (384) -
assets
- Impairment of goodwill 2,708 615
- Charge / (release) re accrued
contingent consideration 417 (615)
- Depreciation 4,009 3,664
- Share based payment charge 675 587
- Amounts claimed under the RDEC (370) (370)
- Finance income (16) (27)
- Finance costs 699 703
-------- --------
Total 10,562 6,958
Changes in working capital
- Inventories (1,295) (1,442)
- Trade and other receivables (7,847) (1,465)
- Trade and other payables 416 2,873
Total (8,726) (34)
Cash generated from operating activities 11,949 19,526
-------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PGGAGGUPRGBQ
(END) Dow Jones Newswires
November 27, 2018 02:01 ET (07:01 GMT)
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