TIDMGHH
RNS Number : 0041B
Gooch & Housego PLC
04 June 2019
4 June 2019
GOOCH & HOUSEGO PLC
INTERIM RESULTS FOR THE SIX MONTHSED 31 MARCH 2019
Gooch & Housego PLC (AIM:GHH) ("Gooch & Housego",
"G&H", the "Company" or the "Group"), the specialist
manufacturer of optical components and systems, today announces its
interim results for the six months ended 31 March 2019.
Key Financial Highlights
Period ended 31 March H1 2019 H1 2018 Change
Revenue GBP59.7m GBP55.6m 7.4%
----------- --------- -----------
Adjusted profit before
tax(1) GBP5.4m GBP7.0m (22.8%)
----------- --------- -----------
Adjusted basic earnings
per share (1) 16.4p 21.5p (23.7%)
----------- --------- -----------
Net (debt) / cash (GBP14.5m) GBP5.0m (GBP19.5m)
----------- --------- -----------
Statutory profit before
tax GBP1.5m GBP5.2m (71.8%)
----------- --------- -----------
Statutory basic earnings
per share 1.1p 18.6p (94.1%)
----------- --------- -----------
Interim dividend per share 4.3p 4.2p 2.4%
----------- --------- -----------
(1) Adjusted for amortisation of acquired intangible assets and
non-recurring items.
Highlights
-- Revenue growth of 7.4% compared with the same period last
year. This was despite a challenging industrial laser market, due
to cyclical downturn and continued US/ China trade dispute.
Excluding the impact of foreign exchange, an increase of 4.1% over
H1 last year
-- We anticipate non- industrial laser business will perform in
line with our expectations. Industrial laser orders have increased
since our last update, but we are now assuming that industrial
laser business will not return to 'normal' levels in FY 2019 and
instead we only supply known / high certainty orders.
-- Given revised industrial laser outlook, Board's expectations
for the Group's adjusted PBT for FY 2019 now reduced by circa
GBP3.5- 4.0 million
-- Hi- reliability fibre couplers to benefit from investment
made in H1 and to show step change in H2. Anticipating a threefold
increase in demand over the next three years, compared to FY
2018.
-- Life science business has more than doubled in size compared
to H1 last year, due to organic growth across all three main Life
Science areas and successful acquisition of ITL
-- Record half year order book of GBP93.2 million, as at 31
March 2019, an increase of 10.0% compared with the same period last
year. Excluding the impact of foreign exchange, an increase of
5.3%.
-- Interim dividend increased to 4.3p (2018:4.2p), reflective of
the Board's longer term confidence in the business, whilst
acknowledging challenging industrial laser trading conditions
Mark Webster, Chief Executive Officer of Gooch & Housego,
commented:
"Trading in the last six months has reflected trends previously
reported. G&H has long been aware of the risks associated with
the cyclical nature of the microelectronics sector and more
recently the continued impact of the US/ China trade dispute. Our
industrial laser order book has increased since our last update,
but we now forecast the industrial laser business will not return
to 'normal' levels in FY 2019.
"Technical innovation in microelectronic, semiconductor and
industrial manufacturing, coupled with our market leading position
means we expect supply of critical components to industrial lasers
to be an important source of growth for G&H for the foreseeable
future.
"The non- industrial laser business is expected to perform in
line with management's expectations. Our fibre optics business
generally is performing strongly and in particular we are investing
in further capacity to take advantage of the multi- year strong
demand growth for hi- reliability fibre couplers.
"We remain confident in the potential of the industrial laser
sector and our other markets to provide attractive long term
growth.
"G&H remains committed to further diversification and moving
up the value chain. We will continue to invest in R&D and where
appropriate make acquisitions in order to meet these strategic
objectives."
For further information please contact:
Mark Webster / Andrew
Gooch & Housego PLC Boteler 01460 256 440
Mark Court / Sophie
Buchanan Wills 020 7466 5000
Investec Bank plc (Nomad Patrick Robb / David
& Broker) Anderson 020 7597 5970
Notes to editors
1. Gooch & Housego is a photonics technology business with
operations in the USA and Europe. A world leader in its field, the
company researches, designs, engineers and manufactures advanced
photonic systems, components and instrumentation for applications
in the Aerospace & Defence, Industrial, Life Sciences and
Scientific Research sectors. World leading design, development and
manufacturing expertise is offered across a broad range of
complementary technologies. It is headquartered in Ilminster,
Somerset, UK.
2. This announcement contains certain forward-looking statements
that are based on management's current expectations or beliefs as
well as assumptions about future events. These are subject to risk
factors associated with, amongst other things, the economic and
business circumstances occurring from time to time in the countries
and sectors in which G&H operates. It is believed that the
expectations reflected in these statements are reasonable but they
may be affected by a wide range of variables which could cause
actual results, and G&H's plans and objectives, to differ
materially from those currently anticipated or implied in the
forward-looking statements. Investors should not place undue
reliance on any such statements. Nothing in this announcement
should be construed as a profit forecast.
Operating and Financial Review
Performance Overview
In sharp contrast to 2018, trading conditions in the first six
months of our 2019 financial year were challenging as adverse
macro-economic factors including the US/China trade dispute and a
downturn in the semiconductor equipment and microelectronics
sectors created a difficult business environment. The effect was
reduced demand for our critical components for industrial lasers
used to manufacture semiconductor equipment and microelectronics.
In contrast demand for fibre optic products and hi- reliability
fibre couplers used in undersea networks exhibited strong growth.
First half revenue growth was 7.4%; excluding the impact of foreign
exchange, growth was 4.1%; and excluding the impact of foreign
exchange and acquisitions revenue fell by 5.4%.
As previously stated, G&H has long been aware of the
potential risks associated with the cyclical nature of the
microelectronics sector and more recently the continued impact of
the US/China trade dispute. Our industrial laser order book has
improved since our last update, but we are now assuming that the
industrial laser business will not return to more 'normal' levels
in FY 2019 and we only supply orders that are known or where we
have a high level of certainty.
We expect the non- industrial laser business will be in line
with management expectations. Fibre optics is strong in general and
we believe that hi- reliability fibre couplers in particular are
about to experience a multi-year growth phase. As a result we are
investing in further capacity to take advantage of our market
leading position in this area. The benefits of the first phase of
this growth should become apparent in the second half of the
current financial year.
While there has been necessary investment in extra capacity in
the fibre optics business, cost reduction measures will deliver an
overall reduction in our cost base for FY 2019. These measures
include structural changes which will deliver a leaner, more
efficient organisation going forward.
Our order book stood at GBP93.2 million as at 31 March 2019, a
record for the half year period and which represents an increase of
10.0% compared with the same time last year. Trading conditions
improved in the second quarter as microelectronic customer
inventory levels began to improve and order activity picked up in
the Aerospace & Defense and Telecommunications sectors. Order
intake in the second quarter was 38% higher than in the first
quarter, though down overall in H1 compared with an historically
high comparative.
The increase in our interim dividend by 2.4% reflects a balance
between our longer term confidence in the business going forward
and our strong balance sheet, whilst acknowledging challenging
trading conditions in our industrial laser market.
REVENUE
Six months ended 2019 2018
31 March
----------------- -----------------
GBP'000 % of GBP'000 % of
total total
--------------------- -------- ------- -------- -------
Industrial 29,603 50% 32,457 58%
Aerospace & Defence 18,447 31% 18,130 33%
--------------------- -------- ------- -------- -------
Life Sciences 11,658 19% 5,021 9%
--------------------- -------- ------- -------- -------
Group Revenue 59,708 100% 55,608 100%
--------------------- -------- ------- -------- -------
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 market was polarised between
subsectors in the first six months of the year. Overall, sales of
products into our industrial markets in the six months to 31 March
2019 were 8.8% lower compared with the equivalent period last year;
excluding foreign exchange this represented a 10.9% decrease.
The industrial laser and semiconductor markets were 14.4% lower,
albeit against historically high comparators, due to adverse
cyclical macro-economic factors and the continuing US/China trade
dispute.
In telecommunications, we believe there will be continued strong
demand for fibre optic components used in under-sea
telecommunications applications, ultimately from Silicon Valley
based companies entering this market and looking to lay their own
undersea networks. Significant orders have been placed, ramp plans
are well progressed and we expect a strong performance from this
business in the second half of this year and into FY 2020 and FY
2021.
Products and Markets - Aerospace & Defence ("A&D")
Product quality, reliability and performance are paramount in
this sector, playing to G&H's strengths, along with our
commitment to provide value. We have solid, well established
positions in target designation and range finding, ring laser and
fibre optic gyroscope navigational systems, infrared and RF
countermeasures, periscopes and sighting systems, opto-mechanical
subsystems used in unmanned aerial vehicles ("UAVs") and space
satellite communications.
The A&D market for G&H is characterised by high-value,
long-term programmes involving the main US and European defence
contractors. Over the past three years, G&H has strengthened
its position in this market with the acquisition of four businesses
(Kent Periscopes, Alfalight, StingRay & Gould Fiber Optics)
whose focus is either entirely or mainly A&D. This reflects
G&H's commitment to this market which continues to represent an
attractive growth area as more applications seek photonics
solutions in a sector with high regulatory and compliance hurdles
and challenging expectations of its equipment.
Our Aerospace & Defence revenue grew by 1.7% during the
first six months of FY2019, compared to the equivalent period last
year. Aerospace & Defence reduced organically by 1.6%, compared
with the same period last year. This was primarily driven by
programme delays at our Boston site which will come on stream in H2
and should deliver a significantly improved H2 performance.
Products and Markets - Life Sciences / Biophotonics
G&H's three principal Life Sciences / Biophotonics revenue
streams are derived from diagnostics (fibre-optic modules for
optical coherence tomography ("OCT") applications, surgery /
treatments (electro-optics and acousto-optics for 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 larger customers. All areas
demonstrated good year on year organic growth.
Our Life Sciences / Biophotonics revenue grew by 132.2% in the
six months to 31 March 2019, compared with the equivalent period
last year. This was driven by the acquisition of VITL Ltd ("ITL")
in August 2018. On an organic basis, excluding acquisitions the
Life Sciences / Biophotonics sector grew by 4.2%.
Strategy
G&H's strategy is built around the twin pillars of
diversification and moving up the value chain. In order to ensure
its strategic goals are met management actively looks to invest in
R&D, acquisitions and strategic partnerships.
R&D: In the first six months of the current financial year,
G&H invested GBP4.0 million in targeted research &
development. Our main target areas are a new generation of
precision lasers and laser systems, optical sensing for harsh
environments, OCT medical diagnostics, laser surgery, space
satellite communications, opto-mechanical systems for UAVs and
armoured vehicles and laser directed energy weapons. This
represents 6.8% of revenue and is 2.2% lower than the same period
last year (2018: GBP4.1m), albeit this is impacted by the strength
of Sterling against the US Dollar. G&H's continued commitment
to investing in targeted R&D programmes is bearing fruit, with
24 new products launched in the period ended 31 March 2019.
Diversification: G&H 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. We will continue to invest in our key sectors in
order to ensure we maintain a balanced portfolio and over time
achieve critical mass in Life Sciences and further strengthen our
position in A&D. Our recent acquisitions have greatly improved
our position in Life Sciences / Biophotonics, which now represents
19.5% of our business (2018: 9.0%).
Moving up the Value Chain: G&H 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. This
will enable G&H to transition from a components supplier to a
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. Our recent
acquisitions, particularly that of VITL Ltd ("ITL"), are design and
sub-assembly businesses and have helped to increase the proportion
of our business derived from sub- system or system revenues from
22.4% in H1 2018 to 31.7%, for H1 2019. G&H has a world class
capability in opto-mechanical design and this substantially
enhances our ability to offer "end to end" design and manufacturing
solutions to our customers.
As well as continuing to develop a leadership position in space
photonics, the global R&D team is actively engaged in
near-market developments in OCT, fibre lasers and fibre optic
sensing as the Company leverages its components expertise to move
up the value chain in these important areas.
Operations
As previously reported, Gooch & Housego's manufacturing
sites have been re-organised into three technical groups, namely
Acousto Optic/Electro Optic, Precision Optics/ Systems and Fibre
Optics. This is part of becoming a more scalable organisation able
to accommodate anticipated growth rates. There have already been
benefits, as we upgrade capacity and performance at Fibre Optic and
Acousto Optic sites.
Principal Risks and Uncertainties
The principal risks and uncertainties to which the Group is
exposed and our approach to managing those risks are unchanged from
those identified on page 27 of our 2018 Annual Report.
Acquisitions
G&H continues to evaluate various 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 focusing 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 VITL Ltd ("ITL"). This acquisition
expanded the Company's presence in the life sciences sector and
further enables G&H's move into system based products.
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 has continued to
exceed our expectations.
In September 2018 G&H acquired the trade and assets of Gould
Technology LLC, trading as Gould Fiber Optics ("GFO"). This
acquisition strengthened G&H's position as the world leader in
fused fibre optic technology and provides enhanced access to
strategic US aerospace and defence customers. As anticipated action
is required to improve GFO's manufacturing capability before we can
take full advantage. GFO is performing below our expectations as
programme delays have impacted order intake, this will be reflected
in the earn out payments.
In November 2018, GBP2.1 million was paid in respect of the
final tranche of the 2016 Kent Periscopes acquisition. This
represented 84% of the maximum potential.
In February 2019, $3.3 million was paid in respect of the final
tranche of the 2017 StingRay acquisition. This represented 83% of
the maximum potential.
As part of its bi-annual review of the carrying value of
goodwill, the Board has taken the decision to impair the goodwill
relating to the Boston cash generating unit. This goodwill arose on
the acquisition of EM4, now referred to as Gooch & Housego
Boston, in January 2011 for consideration of $11.6 million and,
prior to the impairment, the carrying value of the associated
goodwill was GBP5.1m. Over the last eight years this acquisition
has played a vital role in Gooch & Housego's diversification
strategy, by providing the systems and critical mass needed for the
Company to become a credible player in the Aerospace & Defence
market. The duplication of Boston's technology in our Torquay
facility has also been a key factor in allowing Gooch & Housego
to address the European space market. However, on a stand-alone
basis, Boston has struggled to grow its engineering services
business. Whilst recent contract awards for this business are
encouraging signs for the future, nevertheless, the Board feels it
is appropriate to make an impairment of GBP2.6m to the carrying
value of Boston.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
Operating Net finance Taxation Profit after Earnings
profit costs tax per share
-------------------- ------------------ ------------------ ------------------ ----------------
Half Year to 31 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence
-------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Reported 2,976 5,692 (1,494) (444) (1,211) (668) 271 4,580 1.1 18.6
-------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Amortisation of
acquired
intangible assets 1,829 954 - - (74) (62) 1,755 892 7.0 3.6
Restructuring costs 639 502 - - (135) (103) 504 399 2.0 1.6
Site closure costs (521) - - - 99 - (422) - (1.7) -
Impairment of
goodwill 2,576 - - - - 2,576 - 10.3 -
Interest on
discounted
deferred
consideration - - 850 305 - - 850 305 3.5 1.2
Adjustment to
accrued
contingent
consideration (1,445) - - - - (1,445) - (5.8) -
Impact of US tax
rate
change on deferred
tax balances - - - - - (864) - (864) - (3.5)
-------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted 6,054 7,148 (644) (139) (1,321) (1,697) 4,089 5,312 16.4 21.5
-------------------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Adjusted profit before tax was GBP5.4 million, a reduction of
22.8% on the prior year (H1 2018: GBP7.0 million). This reduction
in profit reflects a combination of lower volumes in our
micro-electronics market, delays in placing a number of A&D
contracts and investment in the capacity expansion to address the
surge in demand for undersea telecommunications products.
Cash Flow and Financing
In the six months to 31 March 2019, G&H generated cash from
operations of GBP5.0 million, compared with GBP1.2 million in the
same period of 2018. Inventory has increased by GBP3.1 million
since the year end with the business investing in selected finished
goods inventory to both reduce customer lead times and to prepare
for the undersea telecommunications demand surge. As expected the
year end receivables position has largely unwound and is GBP5.8
million lower as at 31 March 2019.
Capital expenditure on property, plant and equipment was GBP2.8
million in the period (2018: GBP2.7 million). The main fixed asset
additions were in relation to increasing capacity in our sites.
Expenditure on upgrading our ERP system of GBP0.4m is included in
intangible capital expenditure.
The Company's net debt position remains comfortable at GBP14.5
million, up from GBP10.6 million at 30 September 2018, following
the payment of the StingRay & Kent Periscopes earn outs and the
investment in working capital.
Staff
The Company workforce reduced from 1,007 at 30 September 2018 to
990 at the end of March 2019.
Board Changes
As previously announced our Chief Financial Officer, Andrew
Boteler, will leave G&H in June 2019. His successor, Chris
Jewell, is expected to join in September 2019, and we look forward
to welcoming Chris to G&H. In the interim period between Andy
leaving and Chris' start date our Group Financial Controller Gareth
Crowe will lead the finance function.
Alex Warnock, our Chief Operating Officer, has decided to step
down from the Board, and will leave the Group after the end of the
current financial year. He has put in place a strong and
experienced management team based around three manufacturing
centres, which has been successfully operating in its current
structure for the best part of two years. We currently do not
intend to replace Alex and the three manufacturing heads will
report directly to the CEO.
Both Andy and Alex have been an important part of G&H's
success, and their hard work, commitment and experience will be
missed. We wish them both well for their future endeavours.
Dividends
The Directors have declared an interim dividend of 4.3p per
share (2018 : 4.2p per share), a 2.4% increase on the prior period,
which is reflective of the Directors' confidence in the business
going forward, is underpinned by our strong balance sheet, whilst
acknowledging challenging industrial laser trading conditions. This
dividend will be payable on 26 July 2019 to shareholders on the
register as at 21 June 2019.
Prospects and outlook
Trading in the last six months has reflected trends we have
previously reported. The business has seen a downturn in demand for
critical components used in industrial lasers for microelectronic
manufacturing, particularly from China. In contrast demand for
fibre optic products and hi- reliability fibre couplers used in
undersea networks is strong.
As previously stated, G&H has long been aware of the
potential risks associated with the cyclical nature of the
microelectronics sector and more recently the continued impact of
the US/ China trade dispute. Our industrial laser order book has
improved since our last update, but we are now assuming the
industrial laser market will not return to more 'normal' levels in
FY 2019 and instead we only supply known or high certainty orders.
This has resulted in a reduction in the Board's expectations for
the Group's adjusted PBT for FY2019 of circa GBP3.5 - GBP4.0
million.
That said, significant technological innovation in 5G, folding
phones and the greater use of industrial lasers in manufacturing,
coupled with our market leading position means supply of critical
components to industrial lasers will be an important source of
growth for G&H into the foreseeable future.
During FY 2019 we have prepared for significant capacity growth
in fibre optics generally and hi- reliability fibre couplers
specifically, as they undergo a multi-year growth phase.
We remain confident in the potential of the industrial laser
sector and our other target markets to provide attractive long term
growth.
G&H remains committed to the twin pillars of our strategy,
namely diversification and moving up the value chain. As
demonstrated by the acquisition of ITL, our acquisition strategy is
targeting opportunities that enhance the Company's ability to wrap
electronics and software around core photonic products to yield
system-level solutions and to deliver 'critical mass' in Life
Sciences and further strengthen our position in A&D.
Mark Webster Andrew Boteler
Chief Executive Officer Chief Financial Officer
4 June 2019
Unaudited interim results for the 6 months ended 31 March
2019
Group Income Statement Half Year Half Year Full Year
to to to
31 Mar 2019 31 Mar 2018 30 Sep 2018
Note (Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- -------------
Revenue 5 59,708 55,608 124,883
Cost of revenue (39,512) (33,886) (74,811)
-------------- -------------- -------------
Gross profit 20,196 21,722 50,072
Research and Development (3,552) (3,739) (8,229)
Sales and Marketing (4,554) (4,551) (9,237)
Administration (10,378) (8,507) (22,317)
Other income and expenses 1,264 767 507
-------------- -------------- -------------
Operating profit 5 2,976 5,692 10,796
Net finance costs (1,494) (444) (683)
-------------- -------------- -------------
Profit before income tax
expense 1,482 5,248 10,113
Income tax expense 6 (1,211) (668) (2,893)
-------------- -------------- -------------
Profit for the period 271 4,580 7,220
Basic earnings per share 7 1.1p 18.6p 29.3p
-------------- -------------- -------------
Reconciliation of profit before tax to adjusted profit before
tax:
Half Year Half Year Full Year
to to to 30 Sep
2018
31 Mar 2019 31 Mar 2018 (Audited)
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Profit before tax 1,482 5,248 10,113
Amortisation of acquired
intangible assets 1,829 954 2,141
Adjustment to accrued contingent
consideration (1,445) - 417
Impairment of goodwill 2,576 - 2,708
Site closure costs (521) 1,569
Restructuring costs 639 502 864
Transaction fees - - 605
Interest on discounted deferred
consideration 850 305 340
Adjusted profit before tax 5,410 7,009 18,757
-------------- -------------- ------------
Group Statement of Comprehensive Half Year Half Year Full Year
Income to to to 30 Sep
2018
31 Mar 31 Mar 2018 (Audited)
2019
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Profit for the period 271 4,580 7,220
Other comprehensive income
Currency translation differences 11 (1,496) 1,657
-------------- -------------- ------------
Other comprehensive income /
(expense) for the period 11 (1,496) 1,657
Total comprehensive income for
the period 282 3,084 8,877
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2019
Group Balance Sheet 31 Mar 2019 31 Mar 2018 30 Sep 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Non-current assets
Property, plant and equipment 37,942 34,445 38,320
Intangible assets 62,146 38,926 65,734
Deferred income tax assets 1,725 1,502 1,944
-------------- -------------- ------------
101,813 74,873 105,998
Current assets
Inventories 27,570 23,968 24,445
Income tax assets - 638 -
Trade and other receivables 29,205 26,691 35,028
Cash and cash equivalents 15,566 16,053 19,433
72,341 67,350 78,906
Current liabilities
Trade and other payables (19,778) (21,747) (25,262)
Borrowings (76) (6) (75)
Income tax liabilities (491) - (309)
Provision for other liabilities
and charges (1,445) (884) (988)
Deferred consideration (6,059) (4,256) (5,774)
-------------- -------------- ------------
(27,849) (26,893) (32,408)
Net current assets 44,492 40,457 46,498
-------------- -------------- ------------
Non-current liabilities
Borrowings (30,009) (11,002) (29,964)
Deferred income tax liabilities (6,602) (4,438) (6,322)
Deferred consideration (2,806) - (8,363)
(39,417) (15,440) (44,649)
Net assets 106,888 99,890 107,847
-------------- -------------- ------------
Shareholders' equity
Capital and reserves
attributable to equity
shareholders
Called up share capital 5,008 4,950 4,982
Share premium account 16,000 15,530 15,530
Merger reserve 7,262 4,640 7,262
Cumulative translation
reserve 7,242 4,078 7,231
Retained earnings 71,376 70,692 72,842
-------------- -------------- ------------
Equity Shareholders' Funds 106,888 99,890 107,847
-------------- -------------- ------------
Unaudited interim results for the 6 months ended 31 March
2019
Statement of Changes in Share Share Cumulative
Equity capital premium Merger Retained translation Total
account account reserve earnings reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- --------- ----------- ------------- ---------
At 1 October 2017 4,903 15,530 4,640 67,489 5,574 98,136
Profit for the period - - - 4,580 - 4,580
Other comprehensive expense
for the period - - - - (1,496) (1,496)
--------- --------- --------- ----------- ------------- ---------
Total comprehensive income
/ (expense) for the period - - - 4,580 (1,496) 3,084
--------- --------- --------- ----------- ------------- ---------
Dividends - - - (1,608) - (1,608)
Proceeds from shares issued 47 - - (47) - -
Fair value of employee
services - - - 338 - 338
Tax credit relating to
share option schemes - - - (60) - (60)
At 31 March 2018 (unaudited) 4,950 15,530 4,640 70,692 4,078 99,890
At 1 October 2018 4,982 15,530 7,262 72,842 7,231 107,847
Profit for the period - - - 271 - 271
Other comprehensive expense
for the period - - - - 11 11
--------- --------- --------- ----------- ------------- ---------
Total comprehensive income
for the period - - - 271 11 282
--------- --------- --------- ----------- ------------- ---------
Dividends - - - (1,767) - (1,767)
Proceeds from shares issued 26 470 - (19) - 477
Fair value of employee
services - - - 338 - 338
Tax debit relating to
share option schemes - - - (289) - (289)
--------- --------- --------- ----------- ------------- ---------
At 31 March 2019 (unaudited) 5,008 16,000 7,262 71,376 7,242 106,888
--------- --------- --------- ----------- ------------- ---------
Unaudited interim results for the 6 months ended 31 March
2019
Group Cash Flow Statement Half Year Half Year Full Year
to to to 30 Sep
2018
31 Mar 31 Mar (Audited)
2019 2018
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Cash flows from operating activities
Cash generated from operations 5,029 1,151 11,949
Income tax paid (628) (1,646) (2,779)
-------------- -------------- ------------
Net cash generated from / (used
by) operating activities 4,401 (495) 9,170
-------------- -------------- ------------
Cash flows from investing activities
Acquisition of subsidiaries,
net of cash acquired (3,906) (4,414) (24,029)
Disposal of trade and assets - - 384
Purchase of property, plant
and equipment (2,799) (2,739) (5,849)
Sale of property, plant and 1,480 - -
equipment
Purchase of intangible assets (791) (922) (1,377)
Interest received 9 7 9
Interest paid (518) (111) (304)
-------------- -------------- ------------
Net cash used in investing
activities (6,525) (8,179) (31,166)
-------------- -------------- ------------
Cash flows from financing activities
Drawdown of acquisition borrowing
facility - - 17,272
Repayment of borrowings (37) (3) (16)
Dividends paid to ordinary
shareholders (1,733) (1,608) (2,647)
Net cash (used in) / generated
from financing activities (1,770) (1,611) 14,609
-------------- -------------- ------------
Net decrease in cash (3,894) (10,285) (7,387)
Cash at beginning of the period 19,433 26,425 26,425
Exchange gains / (losses) on
cash 27 (87) 395
-------------- -------------- ------------
Cash at the end of the period 15,566 16,053 19,433
-------------- -------------- ------------
Notes to the Group Cash Half Year Half Year Full Year
Flow Statement to to to
31 Mar 2019 31 Mar 2018 30 Sep 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Profit before income tax 1,482 5,248 10,113
Adjustments for:
- Amortisation of acquired
intangible assets 1,829 954 2,141
- Amortisation of other
intangible assets 54 67 683
- Profit on disposal of (902) - -
the Orlando building
- Proceeds from sale of
trade and assets - - (384)
* Impairment of goodwill 2,576 - 2,708
- Adjustment to accrued
contingent consideration (1,445) - 417
- Depreciation 2,224 1,933 4,009
- Share based payment obligations 338 338 675
- Amounts claimed under
the RDEC (195) (195) (370)
- Finance income (5) (7) (16)
- Finance costs 1,499 451 699
-------------- -------------- -------------
Total adjustments 5,973 3,541 10,562
Changes in working capital
- Inventories (3,122) (3,376) (1,295)
- Trade and other receivables 5,828 (2,272) (7,847)
- Trade and other payables (5,132) (1,990) 416
Total changes in working
capital (2,426) (7,638) (8,726)
Cash generated from operating
activities 5,029 1,151 11,949
-------------- -------------- -------------
Reconciliation of net cash flow to movements in net (debt) /
cash
Half Year Half Year Full Year
to to to
31 Mar 2019 31 Mar 2018 30 Sep
2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Decrease in cash in the
period (3,894) (10,285) (7,387)
Borrowings - - (17,272)
Repayment of borrowings 37 2 16
Changes in net (debt) /
cash resulting from cash
flows (3,857) (10,283) (24,643)
Finance leases and borrowings
acquired - - (355)
Translation differences (56) 401 (535)
-------------- -------------- ------------
Movement in net (debt) /
cash in the period / year (3,913) (9,882) (25,533)
Net (debt) / cash at start
of period (10,606) 14,927 14,927
Net (debt) / cash at end
of period (14,519) 5,045 (10,606)
-------------- -------------- ------------
Analysis of net debt
At 1 Exchange At 31 Mar
Oct 2018 Cash flow movement 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------- ----------- ---------- ----------
Cash at bank and
in hand 19,433 (3,894) 27 15,566
Debt due within 1
year (60) - - (60)
Debt due after 1
year (29,947) 32 (83) (29,998)
Finance leases (32) 5 - (27)
---------- ----------- ---------- ----------
Net debt (10,606) (3,857) (56) (14,519)
---------- ----------- ---------- ----------
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 4 June 2019. 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 2018 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 2018 are unaudited.
The Interim Report will be announced to all shareholders on the
London Stock Exchange and published on the Group's website on 4
June 2019. 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 2018,
as described in those financial statements.
2. Application of IFRS
Adoption of new standards
In preparing the interim financial statements, the Group has
adopted IFRS15 "Revenue from contracts with customers". This
standard deals with revenue recognition and establishes principles
for reporting useful information to users of financial statements
about the nature, timing and uncertainty of revenue and cash flows
arising from contracts with customers. Revenue is recognised when a
customer obtains control of a good or service and thus has the
ability to direct the use and obtain the benefits from the good or
service. The implementation of IFRS15 has not led to any material
change in the recognition of the Group's revenue.
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
2018.
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 2018.
There have been no changes to the risk management policies since
the year end.
5. Segmental analysis
Aerospace Life Sciences
& Defence / Biophotonics Industrial Corporate Total
For half year to 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2019
Revenue
Total revenue 18,451 12,044 33,107 - 63,602
Inter and intra-division (4) (386) (3,504) - (3,894)
------------------------------- ----------- ---------------- ----------- ---------- ---------
External revenue 18,447 11,658 29,603 - 59,708
Divisional expenses (17,245) (9,374) (26,416) 2,986 (50,049)
------------------------------- ----------- ---------------- ----------- ---------- ---------
EBITDA(1) 1,202 2,284 3,187 2,986 9,659
EBITDA % 6.5% 19.6% 10.8% - 16.2%
Depreciation and amortisation (460) (303) (1,248) (267) (2,278)
------------------------------- ----------- ---------------- ----------- ---------- ---------
Operating profit before
amortisation of acquired
intangible assets 742 1,981 1,939 2,719 7,381
Amortisation of acquired
intangible assets and
goodwill impairment - - - (4,405) (4,405)
------------------------------- ----------- ---------------- ----------- ---------- ---------
Operating profit 742 1,981 1,939 (1,686) 2,976
Operating profit margin
% 4.0% 17.0% 6.6% 5.0%
------------------------------- ----------- ---------------- ----------- ---------- ---------
Add back non-recurring
items 454 30 235 2,360 3,079
Operating profit excluding
non-recurring items 1,196 2,011 2,174 674 6,055
------------------------------- ----------- ---------------- ----------- ---------- ---------
Adjusted operating profit
margin % 6.5% 17.2% 7.3% - 10.1%
------------------------------- ----------- ---------------- ----------- ---------- ---------
Aerospace Life Sciences
& Defence / Biophotonics Industrial Corporate Total
For half year to 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2018
Revenue
Total revenue 18,130 5,021 36,176 - 59,327
Inter and intra-division - - (3,719) - (3,719)
------------------------------- ----------- ---------------- ----------- ---------- ---------
External revenue 18,130 5,021 32,457 - 55,608
Divisional expenses (15,701) (4,513) (26,733) (15) (46,962)
------------------------------- ----------- ---------------- ----------- ---------- ---------
EBITDA(1) 2,429 508 5,724 (15) 8,646
EBITDA % 13.4% 10.1% 17.6% - 15.5%
Depreciation and amortisation (367) (201) (1,141) (291) (2,000)
------------------------------- ----------- ---------------- ----------- ---------- ---------
Operating profit before
amortisation of acquired
intangible assets 2,062 307 4,583 (306) 6,646
Amortisation of acquired
intangible assets - - - (954) (954)
------------------------------- ----------- ---------------- ----------- ---------- ---------
Operating profit 2,062 307 4,583 (1,260) 5,692
Operating profit margin
% 11.4% 6.1% 14.1% - 10.2%
------------------------------- ----------- ---------------- ----------- ---------- ---------
Add back non-recurring
items - - - 1,456 1,456
Operating profit excluding
non-recurring items 2,062 307 4,583 196 7,148
------------------------------- ----------- ---------------- ----------- ---------- ---------
Adjusted operating profit
margin % 11.4% 6.1% 14.1% - 12.9%
------------------------------- ----------- ---------------- ----------- ---------- ---------
(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 2019 31 Mar 2018
(Unaudited) (Unaudited)
GBP'000 GBP'000
------------- -------------
United Kingdom 15,121 8,656
America 21,595 20,468
Continental Europe 12,412 13,051
Asia-Pacific 10,580 13,433
59,708 55,608
------------- -------------
6. Income tax expense
Analysis of tax charge in the period
Half Year Half Year Full Year
to to to 30 Sep
2018 (Audited)
31 Mar 2019 31 Mar
2018
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
--------------
Current taxation
UK Corporation tax 917 544 1,895
Overseas tax 262 868 1,381
Total current tax 1,179 1,412 3,276
Deferred tax
Origination and reversal of temporary
differences 32 120 481
Impact of change in the US tax
rate - (864) (864)
Total deferred tax 32 (744) (383)
Income tax expense per income
statement 1,211 668 2,893
The tax charge for the six months ended 31 March 2019 is based
on the estimated effective rate of the tax for the Group for the
full year to 30 September 2019. 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
2018
31 Mar 2019 31 Mar (Audited)
2018
(Unaudited) (Unaudited)
No. No. No.
-------------- -------------- ------------
Number of shares used for basic
earnings per share 24,926,574 24,660,697 24,629,591
Dilutive shares 208,823 252,099 265,817
Number of shares used for dilutive
earnings per share 25,135,397 24,912,796 24,895,408
-------------- -------------- ------------
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 2019 31 Mar 2018 30 Sep 2018
(Unaudited)
(Unaudited) (Audited)
p per p per p per
GBP'000 share GBP'000 share GBP'000 share
-------- ------- -------- ------- -------- -------
Basic earnings per share 271 1.1p 4,580 18.6p 7,220 29.3p
Adjustments net of income
tax expense:
Amortisation of acquired
intangible assets 1,755 7.0p 892 3.6p 1,865 7.6p
Goodwill impairment 2,576 10.3p - - 2,708 11.0p
Adjustment to accrued contingent
consideration (1,445) (5.8p) - - 417 1.7p
Site closure costs (422) (1.7p) 1,210 4.9p
Restructuring costs 504 2.0p 399 1.6p 695 2.8p
Transaction fees - - - - 489 2.0p
Interest on discounted deferred
consideration 850 3.5p 305 1.2p 340 1.4p
Tax credit due to US tax
rate change - - (864) (3.5p) (864) (3.5p)
Total adjustments net of
income tax expense 3,818 15.3p 732 2.9p 6,860 27.9p
Adjusted basic earnings per
share 4,089 16.4p 5,312 21.5p 14,080 57.2p
-------- ------- -------- ------- -------- -------
Basic diluted earnings per
share 271 1.1p 4,580 18.4p 7,220 29.0p
Adjusted diluted earnings
per share 4,089 16.3p 5,312 21.3p 14,080 56.5p
------ ------ ------ ------ ------- ------
Adjusted earnings per share before amortisation of acquired
intangible assets 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 4.3 pence per
share for the half year ended 31 March 2019. This dividend has not
been accounted for within the period to 31 March 2019 as it is yet
to be paid.
Half Year Half Year Full Year
to to to 30 Sep
2018
31 Mar 2019 31 Mar (Audited)
2018
(Unaudited) (Unaudited)
GBP'000 GBP'000 GBP'000
-------------- -------------- ------------
Final 2018 dividend paid: 7.1p 1,733 - -
per share
Final 2017 dividend paid: 6.5p
per share - 1,608 1,608
2018 Interim dividend paid :
4.2p per share - - 1,039
-------------- -------------- ------------
1,733 1,608 2,647
-------------- -------------- ------------
9. Borrowings
The group's banking facilities with NatWest Bank comprise a
committed revolving credit facility of $40m and an uncommitted
flexible acquisition facility of $20m both available until 31
August 2021.
The revolving credit facility attracts an interest rate of
between 1.2% and 1.7% above LIBOR dependent upon the Company's
leverage ratio.
10. Called up share capital
2019 2018 2019 2018
No. No. GBP'000 GBP'000
---------
Allotted, issued and fully
paid
Ordinary share of 20p
each 25,036,397 24,907,831 5,008 4,950
------------- ------------- --------- ---------
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
IR LLFEARFIVIIA
(END) Dow Jones Newswires
June 04, 2019 02:00 ET (06:00 GMT)
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