Final Results - Year Ended 30 September 1999

Gooch & Housego PLC 20 January 2000 GOOCH & HOUSEGO PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 1999 Gooch & Housego PLC, the specialist manufacturer of precision optical components and bespoke glass engineering items, acousto-optic devices and instruments for measuring optical radiation, today announces preliminary results for the year ended 30 September 1999. Highlights * Completion of the acquisition of Cleveland Crystals Inc which contributed to increased profits. * Turnover increased by 45% to £10,377,000 (1998: £7,154,000) * Operating profit increased by 18% to £2,001,000 (1998: £1,701,000) * Appointment of new Management team to the Board in January 2000 * Recommended increase in final dividend of 1.3p per share making a total for the year of 1.9p (1998 : 1.7p) Archie Gooch, Chairman of Gooch & Housego commented, 'In the past year we have witnessed several significant changes within the Group. We have already taken steps in our various operations to meet the challenges of the markets in which we operate. All of our subsidiaries are working closely together to integrate their unique technical and marketing skills, and I believe that, with the new management team in place, we again have a solid foundation on which to develop the Group'. For further information: Archie Gooch/Ian Bayer Gooch & Housego PLC 01460 52271 Tim Thompson/Jennie Duschenes Buchanan Communications 0171 466 500 CHAIRMAN'S STATEMENT I am pleased to submit my report for the year ended 30th September 1999. These results reflect the considerable changes at Gooch & Housego PLC including the key strategic acquisition of Cleveland Crystals Inc (CCI) in February 1999. The acquisition was achieved against strong competition from both French and German companies, but we were successful because the Management of CCI perceived that under our ownership there were considerable advantages in the product range and Management structure. RESULTS & DIVIDENDS Overall Group results for the year, including a significant eight-month contribution from CCI, are ahead of last year, although below our initial expectations. Turnover increased 45% from £7,154,000 to £10,377,000. Operating profits, after deducting the amortisation of goodwill arising on the acquisition of CCI of £115,000, were £2,001,000 (1998 : £1,701,000) an increase of 18%. Profits before tax were £1,851,000 (1998 : £1,812,000). The reduction in earnings per share to 6.5p (1998 : 7.5p) reflects the higher relative contribution from the Group's US subsidiaries where tax rates are higher. As a measure of the Board's confidence in the current and future prospects of the Group, it is recommending an increased final dividend of 1.3p (1998 : 1.2p) which, together with the interim dividend paid, totals 1.9p (1998 : 1.7p) for the year. Subject to approval at the Annual General Meeting the final dividend will be payable on 2 March 2000 to all shareholders on the register on 4 February 2000. UNITED KINGDOM Although turnover was marginally higher than in the previous financial year at £4,798 ,000 (1998: £4,565,000) there were two problems that affected the UK business. The first of these, which was beyond our control, was due to the much publicised problems of the electronics industry in Japan and the Far East. We suffered a 21% down turn in the call off of Q-switches and this significantly affected the profitability of our UK business. I am pleased to report that sales and production have now returned to their 1998 levels and are increasing. The forward order book is still buoyant and there have been no cancellations of annual contracts. The second problem was the delay in the installation and implementation of the new computer system. A number of measures have now been taken to improve the flexibility and responsiveness of our manufacturing process, including the introduction of a new computerised material requirements planning and production control system. The introduction of the computer system has taken longer than expected and resulted in a number of the production difficulties already referred to. I am pleased to report that following the appointment of an experienced IT Manager all modules of the new systems are expected to be fully operational by March 2000 with the resultant expected increases in efficiency. Progress on the development of a fibre-optic switch for telecommunications applications is ongoing. The research laboratory dedicated to this project is now fully established, and our new physicist is generating encouraging results. We are pleased to report that one of the main problems has now been overcome, which has given us encouragement that this switch can be developed to the final stages. Our traditional precision optics business has come through a turbulent year when, as referred to in my interim report, although orders increased significantly the complexity of work resulted in less efficient production and a decline in profitability. I am pleased to report that our new middle management team has tackled the operational production problems and the business looks strongly placed to develop in the current financial year with a greater depth of skills across the employee base. The optics business has the opportunity of some significant orders in the current year which should help return the business to its historic levels of profitability. UNITED STATES CLEVELAND CRYSTALS INC The Board is very pleased to have secured the £4,272,000 acquisition of CCI. In the period since acquisition CCI has contributed profits of £927,000 on turnover of £3,247,000. These excellent results, benefitted from the accomplishment of certain milestones on contracts with The US Department of Energys National Ignition Facility (NIF) at Lawerence Livermore National Laboratories (LLNL) in California and the ongoing supply of large crystals to Rochester University. In comparison trading in CCIs core electro optics Q switches has suffered in the same way as the UK business. The prospects for the current year are encouraging as CCI continues work on the growth and fabrication of crystals for the new laser facility at LLNL as part of a $5 million incrementally funded contract, although the relative level of profitability on the current stages of the contract is expected to be less. OPTRONICS LABORATORIES Inc As reported in my interim statement trading conditions at Optronic Laboratories Inc ('OLI') continue to be difficult. Turnover for the twelve months was £2,562,000 (1998: £2,723,000) down 6% with a resultant fall in operating profits to £66,000 (1998 : £277,000). Trading in the first quarter of the current financial year has started ahead of the same period of 1998 and I am particularly encouraged by the increased level of enquiries. New products launched earlier in the year are experiencing an increasing level of interest and we are anticipating that sales will increase in the latter part of 2000. I am pleased to report that the optics facility is now fully operational in Orlando and sales have commenced. The facility will allow G&H to penetrate the US market as a local supplier as well as providing a secondary specialist production facility to satisfy the high levels of demand being experienced in the UK. DIRECTORS It was with much sadness that I reported the resignation of Tony Heals through ill health. He had been a loyal servant of the Group for 30 years, latterly as Financial Director. He will be much missed by all our staff. Gareth Jones who had been Managing Director has also moved on to further his career outside of the industry. His unique skills as a physicist in acousto optics helped establish G&H as a leader in the Q switch market several years ago. I am delighted since the year-end to have appointed a new team to the Board, who I believe have the proven ability to drive the Group forward. Paul Kenrick joined at the start of January as replacement for Gareth Jones as Managing Director. Paul has over thirty years experience in the optical industry and has been responsible for several major optical catalogue businesses. His operational experience at Corning together with his market knowledge gained at Melles Griot and OptoSigma will be an invaluable asset to the Group. Ian Bayer has replaced Tony Heals as Finance Director. He brings with him a wealth of operational and financial experience as a Finance Director within the public company arena. His experience of controlling US subsidiaries will be particularly helpful, as this part of the group has become increasingly important. Bill Pooles appointment as Director of Production is bringing further success. I am delighted to announce that Eugene Arthurs the former president of CCI has joined the Board as Non-Executive Director. He has been involved in the optical industry across both sides of the Atlantic for over thirty years in both a commercial and senior management role. He is currently Executive Director of SPIE the International Society for Optical Engineering in the US. His vast knowledge of the optics industry will bring considerable strength to the Board. He joins Jan Melles who also has world wide respect in our industry. MANAGEMENT AND STAFF The past year has been challenging for the Group. I am grateful for the effort and dedication shown by the management and staff without whom these results announced today would not have been possible. PROSPECTS In the past year we have witnessed several significant changes within the Group. We have already taken steps in our various operations to meet the challenges of the markets in which we operate. All of our subsidiaries are working closely together to integrate their unique technical and marketing skills, and I believe that, with the new management team in place, we again have a solid foundation on which to develop the Group. The current year has begun with strong order books and in line with expectations, and we look forward to a year of increased growth. Archie Gooch MBE JP Executive Chairman 20th January 2000 GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 SEPTEMBER 1999 Existing Acquisitions Operations 1999 1998 £ 000 £ 000 £ 000 £ 000 Turnover 7,130 3,247 10,377 7,154 Trading expenditure (6,056) (2,320) (8,376) (5,453) ------ ------- ------- ------- Operating profit 1,074 927 2,001 1,701 ====== ====== Exceptional item: Profit on disposal of fixed assets - 85 ------ ------ Profit on ordinary activities before interest 2,001 1,786 Other interest receivable and similar income 41 88 Interest payable and similar charges (191) (62) ------ ------- Profit on ordinary activities before taxation 1,851 1,812 Tax on profit on ordinary activities (756) (569) ------- ------ Profit on ordinary activities after taxation 1,095 1,243 Dividends on equity shares (321) (288) ------- ------- Retained profit for the financial year 774 955 ====== ======= Earnings per 20p ordinary share 6.5p 7.5p All operations undertaken by the Group during the current year are continuing. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 30 September 1999 1999 1998 £ 000 £ 000 Profit for the financial year 1,095 1,243 Currency translation difference on foreign currency net investments 16 (55) ----- ------ Total recognised gains and losses for the 1,111 1,188 financial year ===== ====== No note of historical cost profit for the group or the company has been presented as the difference between the reported profit is immaterial. CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 1999 1999 1998 £ 000 £ 000 £ 000 £ 000 FIXED ASSETS Intangible assets 3,336 4 Tangible assets 3,497 2,955 ----- ------ 6,833 2,959 CURRENT ASSETS Stocks 1,440 1,178 Debtors 3,238 1,591 Cash at bank and in hand 269 1,416 ----- ------ 4,947 4,185 CREDITORS : amounts falling due within one year (2,806) (1,571) ------ -------- NET CURRENT ASSETS 2,141 2,614 ------ ------- TOTAL ASSETS LESS CURRENT 8,974 5,573 LIABILITIES CREDITORS : amounts falling due after more than one year (2,916) (305) ------- ------- 6,058 5,268 ======= ======= CAPITAL AND RESERVES Called up share capital 3,381 3,381 Share premium account 1,113 1,113 Revaluation reserve 308 308 Profit and loss account 1,256 466 ------ ------ EQUITY SHAREHOLDERS FUNDS 6,058 5,268 ====== ====== Note; The 1998 Balance Sheet, has been restated following the implementation of FRS10 'Goodwill and Intangible Assets'. CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 1999 Note 1999 1998 £ 000 £ 000 £ 000 £ 000 Cash flow from operating activities (i) 1,592 1,423 Returns on investments and servicing of finance Interest received 41 88 Interest paid (173) (67) Interest element of hire purchase contracts (1) (7) ------- -------- Net Cash (outflow)/inflow from returns on investments and servicing of finance (133) 14 Taxation UK tax paid (522) (374) Overseas tax paid (251) (68) ------- -------- Cash outflow from taxation (773) (442) Capital expenditure and financial investment Purchase of tangible fixed assets (612) (1,193) Sale of tangible fixed assets 15 286 ------ -------- Net cash outflow from capital expenditure and financial investment (597) (907) Acquisition Acquisition of subsidiary (4,272) - Cash acquired on acquisition 55 - -------- -------- Net cash outflow from acquisition (4,217) - Equity dividends paid (304) (111) ------ ------ Cash inflow before financing (4,432) (23) Financing New bank loans 3,411 - Cash inflow from flotation - 1,495 Repayment of bank loan (202) (219) Capital element of hire purchase contracts (49) (11) -------- ------- Net cash inflow from financing 3,160 1,265 ----- ----- (Decrease)/increase in cash in the year (iii) (1,272) 1,242 ======= ===== CONSOLIDATED CASH FLOW STATEMENT Notes to the cash flow statement (i) Reconciliation of operating profit to operating cash flows 1999 1998 Continuing Acquisitions Total £ 000 £ 000 £ 000 £ 000 Operating profit 1,074 927 2,001 1,701 Amortisation of goodwill - 115 115 - Depreciation 318 44 362 258 Decrease/(increase) in stock 21 182 203 (362) (Increase) in debtors (605) (685) (1,290) (95) (Decrease)/increase in creditors 139 62 201 (79) ----- ----- ----- ----- 947 645 1,592 1,423 ===== ===== ===== ====== (ii) Cash flow relating to exceptional items The cash inflows in the year ended 30 September 1998 included a cash inflow of £286,000 received from the new proceeds of selling the Orlando factory. (iii) Reconciliation of net cash inflow to movement in net funds/(debt) 1999 1998 £ 000 £ 000 (Decrease)/increase in cash in the (1,272) 1,242 year Cash (inflow)/outflow from (increase)/decrease in debt and lease financing (3,159) 230 ------- ------ Changes in net debt resulting from cash flows (4,431) 1,472 New hire purchase contracts (66) - Translation difference 22 (12) ------- ------- Movement in net debt in the year (4,475) 1,460 Net funds/(debt) at 1 October 1998 893 (567) ------- ------ Net (debt)/funds at 30 September 1999 (3,582) 893 ======= ====== Liquid resources comprise short-term deposits with banks. CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 1999 (iv) Analysis of net (debt)/funds At 1 At 30 October Cash Exchange Non-cash September 1998 flow Movement Movement 1999 £ 000 £ 000 £ 000 £ 000 £ 000 Cash in hand at bank 1,416 (1,158) 11 - 269 Overdrafts - (114) - - (114) ------- (1,272) Debt due after 1 year (280) (2,632) 12 - (2,900) Debt due within 1 year (186) (577) - - (763) Hire Purchase (57) 50 (1) (66) (74) ------- (3,159) ------ ------- ---- ----- ----- 893 (4,431) 22 (66) (3,582) ====== ======= ==== ===== ====== Copies of this statement will be sent to shareholders on 4 February 2000 and will be available from The Old Magistrates Court, Ilminster, Somerset.

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