Interim Results

RNS Number : 8242W

Gooch & Housego PLC

17 June 2008

 



For immediate release

17 June 2008

Gooch & Housego PLC

INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2008

Gooch & Housego PLC ('G&H' or 'Group'), the specialist manufacturer of optical components and systems, today announces its Interim Report for the six months ended 31 March 2008.

Operational highlights

• Reorganised group structure - Components and Life Sciences 
• Integrated five components operations into a single, global business
• New management systems and controls
• Established new worldwide sales organisation
• Relocated largest manufacturing operation to new state-of-the-art facility
• Launched two new life sciences products - first orders received
• Re-focussed new product development and increased R&D expenditure
• Initiated development of several key new products
• Strengthened board with new CFO and NED

Financial highlights

• Group revenue up 15.1% to £15.7m (2007: £13.6m) including contribution from acquisition
• Record order book of £15.8 million, up 21% since 30 September 2007
• Divisional EBITDA maintained at £4.0 million despite adverse trading in first quarter
• Increased R&D and Sales costs reflecting investment for long term growth
• Group operating profit down 30.6% to £2.2m (2007: £3.2m)
• Group operating profit before amortisation down 23.9% to £2.5m (2007: £3.2m)
• Group profit before tax down 31.3% to £2.2m (2007: £3.3m)
• Tax rate down from 34.1% to 28.8%
• Group profit after tax down 25.8% to £1.6m (2007: £2.2m)
• Basic EPS down 29.4% to 8.4p (2007: 11.9p) 
• Adjusted basic EPS excluding amortisation down 22.7% to 9.2p (2007: 11.9p) 
• Interim dividend held at 1.5p (2007: 1.5p)
  

Gareth Jones, CEO, commented: -

'Our headline financials mask a period of exciting change for Gooch & Housego where much positive progress has been made despite some of the most challenging market conditions we have experienced for many years. After a difficult first quarter we have seen steady improvement and our outlook for 2009 and beyond remains cautiously optimistic given our record order book, our pipeline of new products and our ambitious plans for the future of the business.'

For further information please contact:

Gooch & Housego PLC	01460 256 440
Gareth Jones / Peter Quinn
Oriel Securities Ltd	020 7710 7600
Andrew Edwards / Jonathan Walker
Buchanan Communications	020 7466 5000
Tim Thompson / Nicola Cronk / Susanna Gale

Chairman's Statement 

The first half of the 2008 financial year has been a challenging one from which Gooch & Housego has emerged a stronger business. 

Approximately two years ago we set out to position Gooch & Housego to take advantage of emerging opportunities for optoelectronic technologies. In order to do this it was necessary to make the transition from a collection of small engineering companies to an integrated technology business with the management and structures needed to operate effectively in a global market. In particular, we set out to create an environment that would encourage the development of complex products across multiple operating locations and facilitate the addition of new businesses through strategic acquisitions.

Despite challenges presented by a combination of factors including difficult trading conditions and the relocation of our largest manufacturing operation, which took place during the period of this report, we have pressed ahead with the reorganisation of the business. We have established a new divisional structure, integrated our five components businesses and created a new worldwide sales organisation with a presence in all of our key markets. Behind the scenes changes, which will be fully implemented by the end of the financial year, have enhanced financial controls and will help to reduce working capital and lessen our tax burden. The new Ilminster factory is a milestone in the history of Gooch & Housego, and provides world-class optical manufacturing facilities with sufficient expansion potential to be home to the business for many years to come. By the end of the year we will have completed the re-positioning of the business that we embarked upon two years ago.

There were a number of one-off costs associated with these initiatives that have impacted earnings during the first half of the year, and ongoing costs have also increased as a consequence of our increased spending on sales & marketing and research & development. This has coincided with a reduction in sales of our highest margin products as a result of the slowdown in demand from the semiconductor and microelectronics sector. While other sectors of the business have performed well the overall effect has been to reduce first half profits when compared with the same period last year, despite increasing sales revenues.

After a low point during the first quarter of our financial year, demand for acousto-optics has progressively recovered through the second and into the third quarters. It has yet to reach the levels we experienced last year, but we have some compelling new products and we are well positioned to take full advantage of improving market conditions. The first half of the year saw the launch of two important new products for the life sciences market, which we believe offers considerable potential for growth, and strong demand for our electro-optic and fibre optic products. In order to keep pace with the increase in demand for fibre optics we have begun the construction of an extension to our Torquay plant. This additional capacity is expected to come on line in September of this year and, when taken alongside our progress in developing manufacturing capacity in lower cost regions, will provide us with sufficient space for the foreseeable future.

In summary, Gooch & Housego has made substantial progress in difficult market conditions and we remain cautiously optimistic about prospects for 2009 and beyond.

Dr Julian Blogh

Chairman

17 June 2008

  Chief Executive Officer's Review

Overview

The first half of the 2008 financial year has been a period of exciting change for Gooch & Housego, set against a backdrop of unfavourable market conditions and a hesitant world economy. We have:-

• integrated our five optoelectronics components businesses into a single, global entity,
• established a new, worldwide sales organisation across the integrated business,
• relocated our Ilminster manufacturing operations and corporate headquarters to new state-of-the-art premises (the first move in our sixty years), and 
• strengthened the Board of Directors.

The objective of these changes is to facilitate sustainable growth by providing G&H with the management and infrastructure it needs to make the transition from a successful small company to an even more successful global technology business. Adding new products, technologies, expertise and entering new markets through acquisition continues to be part of our strategy and one of the aims of the recent changes is to facilitate the assimilation of new acquisitions. 

While we have been historically successful in establishing a dominant position in some of our main markets, this has reduced our scope for growth and left us susceptible to fluctuations in demand caused by global economic factors, as we have recently experienced. A central part of our strategy in recent years has been to diversify our product range and market exposure. The sectors in which we believe G&H can be particularly effective are biomedical & life sciences and aerospace & defence. The acquisitions of ChromoDynamics in 2006 and SIFAM Fibre Optics in 2007 have strengthened our presence in these markets. Earlier this year we launched two important new biomedical and life sciences products and have made our first sales even though this is a conservative market that can be slow to adopt new technologies.

We have accelerated our investment in R&D and reorganised our management of new product development in order to bring products to market more rapidly and to make more effective use of the skills we have spread across multiple locations around the world. A direct consequence of this investment is the increased rate at which we are extending our intellectual property portfolio and filing patent applications. Earlier this year we began the development of what we believe will be two significant new products in our core laser components business. These new products will be offered alongside our world-leading acousto-optic and electro-optic Q-switches and fibre laser combiners.

Like many other businesses in our field, G&H has suffered from the downturn in the semiconductor and microelectronics sector, which is a significant market for the laser systems in which our key acousto-optic Q-switch products are used. While we have experienced growth in other market sectors such as undersea telecommunications, aerospace & defence, biomedical and research, they currently represent a smaller proportion of our turnover and profits and have therefore not fully compensated for the reduction in demand for Q-switches. As indicated in our trading update, the reduction in short-term demand for acousto-optics was particularly pronounced in our first quarter but has made a good recovery since then, although the US market is still weak and difficult to predict. In contrast, long-term demand is stronger than ever as reflected by our record order book, which increased by 21% during the first half of the year. This apparent contradiction is explained by our customers continuing to have confidence in G&H and in the medium term outlook, while modulating their requirements in the short-term to reflect current market conditions. 

Despite the downturn in one of our main markets we are able to report increased year-on-year first half revenues of £15.7 million (2007: £13.6 million) thanks to a contribution of £2.9 million from Gooch & Housego (Torquay) Ltd. (formerly SIFAM Fibre Optics Ltd.), which was acquired in May 2007. This acquisition has contributed technology, management expertise and access to new markets in addition to revenue, and we are pleased with progress. Overall group profits in the first half of the year are lower than the same period last year due to a reduction in demand for some of our most successful and highest margin products combined with the disruption caused by the factory relocation (minimised but not zero), the distraction of the Group reorganisation and our increased investment in R&D and Sales & Marketing. 

  Prospects

We have already seen improvement in market conditions, our orders are at record levels and we are beginning to derive benefits and savings from the changes and investments we have recently made. These factors should enable us to achieve growth in the second half of the year, when compared to the first half of the year, and leave us well placed for further progress in 2009, market conditions permitting. 

This year our sales will be derived from a significantly different product mix to that which we have had in recent years. In particular, sales of our acousto-optic products are expected to be down year-on-year but we will have our first full year of sales of fibre optic products from the SIFAM acquisition. The net result is expected to be an overall increase in revenues year-on-year. However, the shift from high margin acousto-optic sales to lower margin fibre optic sales will impact on overall profitability due in the main to the product margin differentials.

We now have the resources and infrastructure to derive the full potential from our recent reorganisation and acquisitions, and despite the uncertain economic climate we will continue to pursue organic and acquisitive growth opportunities. 

Divisional Review

Optoelectronic Components and Materials - Gooch & Housego

Reorganisation

In January this year we launched a new, global optoelectronic components and materials business. Created by the integration of our five components operations (two in the UK, two in the USA and one in Germany), the new business, with annual revenues of approximately £30 million ($60 million), instantly became one of the larger players on the world stage. Supported by a new global sales organisation and with two new sales offices on the US West Coast and in Hong Kong, covering the Asia-Pacific region, the integration has been well received by our customers and provides a foundation for further organic and acquisitive growth. 

Trading

G&H has benefited from solid demand for components and sub-systems for telecommunications, biomedical and research applications, and has achieved growth in all of these areas. This growth has not been sufficient to offset the decline in demand from laser materials processing, which is the primary market of acousto-optic Q-switches. Lasers are used in the manufacture of a vast range of everyday products and one of the most significant applications is in the manufacture of semiconductors and microelectronics. This market is historically cyclical and has suffered a well publicised downturn in the past twelve months, which is largely responsible for the reduced demand for Q-switches.

Demand for Q-switches was very high during the first half of the 2007 calendar year, but declined sharply in the first quarter of the current financial year, exacerbated by a certain amount of inventory build-up at our customers' sites. The European and Far Eastern markets have recovered since the start of 2008 and order intake in these markets for the year as a whole has almost returned to expected levels. The US market was slower to decline but has also been slower to recover and current conditions remain uncertain.

Investment in R&D

In spite of recent softness we have confidence in the long term strength of the laser materials processing market based on the increasing adoption of laser technology in precision industrial and medical applications. We have continued to invest in R&D to enhance the performance and reduce the cost of our products, while introducing new products and services. In January 2008 we launched the latest version of our already market leading acousto-optic Q-switch, the 'Stallion', which brings major benefits to customers. Our electro-optic Q-switch, for high-power and research applications, continues to be regarded as the world leader and has increased its market share and revenues this year. We will shortly be launching a new family of fibre-optic coupled acousto-optic devices that have been developed by bringing together our fibre optics expertise in Torquay with that in acousto-optics in Ilminster to yield a product that will set new standards of performance. The Q-switch member of this family will find applications in fibre lasers, which is the fastest growing segment of the laser market.

Potentially the most important new product currently under development is an optical isolator, which is also targeted at fibre laser applications. We are now more than six months into a major programme to develop a family of isolators that will satisfy the stringent requirements imposed by high-power fibre lasers. Using our expertise in intra-cavity optics, crystals, high damage threshold coatings and fibre optics we aim to introduce a world-leading product into a market that we know very well. Launch is scheduled for early 2009.

Investment in manufacturing facilities

In addition to investment in R&D we have been working hard to increase manufacturing capacity, improve quality and increase efficiency through the provision of new facilities. The completion of the new factory at Dowlish Ford, less than a mile from the Ilminster site on which the Company was founded sixty years ago, is the most notable event during the period of this report, and is one of the most significant in the history of G&H. The new factory provides state-of-the-art facilities and doubles manufacturing space in a single step. We are now well positioned to respond to an upturn in demand for acousto-optics and precision optics.

The relocation was completed in March 2008. While any event of this magnitude and complexity inevitably results in a certain amount of disruption and loss of production this was kept to a minimum. Most importantly we were able to minimise the effect on shipments by building up buffer inventory in anticipation of the move to the extent that we were able to meet our customers' requirements throughout this period almost without exception. 

Earlier this year we started the construction of an extension to our Torquay facility that will increase floor space by a third. The space is needed to meet the increased demand for fibre optic components and, in particular, modules for applications such as biomedical imaging. The extension will be completed by the end of this financial year.

Instrumentation and Life sciences

Our instrumentation and life sciences activities have potential for significant growth in the coming years from its current base at approximately 10% of Group revenues. Trading was broadly on target but order intake suffered towards the end of the first half of the year, in part due to low economic activity in the US. However, quotation levels have risen more recently and there are signs that confidence is returning.

The first half of the year was significant because it saw the launch of our first two products targeted predominantly at the life sciences market. In December 2007 we launched ChromoDynamics' first product, the HSi300, a hyperspectral imaging system for microscopy applications. In January 2008 we launched the OL490 Agile Light Source, a highly flexible light source that is capable of producing an output with an almost infinitely variable spectral profile. Although the OL490 addresses a wide range of applications it is as an excitation source for microscopy that it is generating most interest. The OL490 and the HSi300 are highly complementary and make a unique combination of spectral illumination and imaging systems. 

Several HSi300 and OL490 systems have already been sold and are generating encouraging interest in the field of biomedical research from both end users and potential OEM customers.

We are continuing to investigate the potential for hyperspectral imaging in diagnostic applications. Building on the successful proof of concept study that we performed last year we are currently part way through a pilot study to assess the effectiveness of a HSi300 based system to provide a semi-automated diagnosis of bladder cancer. A successful result would open up the potential to develop, and seek FDA approval for, a full clinical system. In parallel, we engaged in discussions with potential partners for other similar diagnostic systems.

Group Functions

An integral part of the reorganisation of the business is streamlining the financial systems to deliver improved and more timely information thereby enabling tighter financial control to be applied across an increasingly complex business. This has involved a complete review of our corporate and legal structure and our financial management procedures, resulting in a number of significant changes. Among the expected benefits are a reduction in working capital, lower interest charges and a lower tax burden. Considerable progress has already been made in these areas but there are still further gains to be made and the final structures will not be in place until the end of this financial year. An integral part of this exercise is the roll out of a common, integrated management information system across all sites. This is scheduled for completion in the same timescale.

The Board and Employees

I am pleased to be able to welcome two new members to the board of G&H. Peter Quinn joined as Chief Financial Officer in November 2007 and brings with him many years of senior financial and operational management experience including several years in the US in NASDAQ listed companies. In January 2008 Paul Heal joined the board in a non-executive capacity and as Chairman of the Audit Committee. Paul was previously a partner with PricewaterhouseCoopers.

I would like to thank our employees for their support and understanding during a period in which we have successfully implemented several major changes with minimal disruption. 

Gareth CW Jones

Chief Executive Officer

17 June 2008

  Chief Financial Officer's Report 

Financial Results - Headline 

For the six month period to 31 March 2008 the Group returned profit after tax of £1.596m compared to the corresponding period last year when the Group returned profit after tax of £2.150m.

On an earnings per share basis for the six month period to 31 March 2008 the Group returned basic and diluted earnings per share of 8.4p (2007: 11.9p) and 8.1p (2007: 11.6p) respectively.

Excluding the impact of the amortisation of acquired intangibles assets relating to the acquisition of Gooch & Housego (Torquay) Limited, profit after tax in the six month period to 31 March 2008 amounted to £1.754m compared to profit after tax in the corresponding period last year which amounted to £2.150m.

Financial Performance - Income Statement

Group revenue for the six month period to 31 March 2008 amounted to £15.693m, an increase of £2.064m or 15.1% over the corresponding period last year.

The increase in revenue, year over year, in absolute terms, was predominantly driven by the sales performance of the Group's Components and Material Division's fibre optics business, acquired in May 2007, which generated revenue of £2.948m in the six month period to 31 March 2008 and significantly off-set the sales weakness experienced by the Group's Components and Materials Division's acousto-optic business in the supply of its Q-switch product to the semiconductor and microelectronics industry.  

Group operating profit for the six month period to 31 March 2008 amounted to £2.245m compared to the corresponding period last year when the Group returned an operating profit of £3.235m.

Excluding the impact of the amortisation of acquired intangible assets relating to the acquisition of Gooch & Housego (Torquay) Limited, operating profit in the six month period to 31 March 2008 amounted to £2.463m compared to operating profit in the corresponding period last year which amounted to £3.235m.

Of significance and impacting on Group operating profit in the six month period to 31 March 2008 is the Group's commitment to Research & Development, with expenditures incurred amounting to £1.110m representing 7.1% of revenue and Sales & Marketing with expenditures incurred amounting to £0.879m representing 5.6% of revenue.

The increase in Sales & Marketing expenditures in the six month period to 31 March 2008 compared to the corresponding period last year is predominantly due to the establishment of the Components and Materials Division's integrated world-wide sales force and the establishment of sales offices in Hong Kong and on the West Coast of the USA.

Group profit after tax for the six month period to 31 March 2008 amounted to £1.596m after a tax provision of 28.8% of profit before tax compared to the corresponding period last year when the Group returned profit after tax of £2.150m after a tax provision of 34.1% of profit before tax. The reduction in the effective tax rate year on year reflects a one time gain for a prior period adjustment and the impact of the establishment of a US Federal Tax Group structure.

Financial Performance - Balance Sheet

The Group Balance Sheet remains strong with net assets of £26.745m, an increase of £0.750m on the year-end position as at 30 September 2007.

Group non-current assets as at 31 March 2008 amounted to £23.856m a net increase of £2.574m compared to the position at the year-end 30 September 2007. The increase is predominantly the result of additional capitalised expenditure on the Group's Components and Materials Division's new facility and corporate headquarters at Dowlish Ford, Ilminster, UK. 

Group net current assets as at 31 March 2008 amounted to £4.728m a decrease of £1.884m compared to the position at the year-end 30 September 2007. The decrease is predominantly the result of an increase in borrowings amounting to £1.916m.

Financial Performance - Cash

The Group net cash outflow in the six month period to 31 March 2008 totalled £4.074m. This related mainly to expenditure in connection with the Group's Components and Materials Division's new facility and corporate headquarters at Dowlish Ford, Ilminster, UK which amounted to £4.102m. 

Group net cash as at 31 March 2008 amounted to a negative cash position of £3.373m, representing a movement of £3.886m from the net positive cash position of £0.513m at the year-end 30 September 2007. These borrowings are funded under the Group's committed facility from its bankers, Royal Bank of Scotland.  

Dividends

The Directors have declared an interim dividend of 1.5p to be paid on 1 August 2008. The dividend has been maintained at the same level as last year. The shares will go ex-dividend on 25 June 2008.

Peter J Quinn

Chief Financial Officer

17 June 2008

Group Income Statement

	Note	6 Months to 31 March 2008 Unaudited	6 Months to 31 March 2007 Unaudited	12 Months to 30 Sept 2007 Unaudited
		£000	£000	£000
Revenue	2	15,693	13,629	30,675
Cost of revenue		(8,041)	(6,470)	(14,651)
Gross profit		7,652	7,159	16,024
Research & Development		(1,110)	(747)	(1,898)
Sales & Marketing		(879)	(534)	(1,383)
Administration		(3,478)	(2,754)	(5,874)
Other income		278	111	132
Operating profit before amortisation of acquired intangible assets	2	2,463	3,235	7,001
Acquired intangible assets amortisation		(218)	0	(551)
Operating profit	2	2,245	3,235	6,450
Finance income		50	84	181
Finance costs		(52)	(55)	(124)
Profit before income tax expense		2,243	3,264	6,507
Income tax expense	3	(647)	(1,114)	(2,360)
Profit for the period		1,596	2,150	4,147
Earnings per share	4	8.4p	11.9p	22.6p
Diluted earnings per share	4	8.1p	11.6p	21.6p

  Group Balance Sheet

		31 March 2008 Unaudited	31 March 2007 Unaudited	30 Sept 2007 Unaudited
		£000	£000	£000
Non-current assets
Property, plant & equipment		15,965	6,746	12,192
Intangible assets		6,983	5,303	7,122
Deferred income tax assets		908	1,559	1,968
		23,856	13,608	21,282
Current assets
Inventories		5,719	4,006	5,081
Trade and other receivables		5,791	4,529	6,627
Income tax receivable		442	-	227
Cash and cash equivalents		3,577	4,560	5,428
Non-current assets held for resale		345	357	357
		15,874	13,452	17,720
Current liabilities
Trade and other payables		(3,584)	(2,285)	(5,378)
Borrowings		(7,111)	(2,059)	(5,195)
Income tax liabilities		(215)	(652)	(255)
Provision for other liabilities and charges		(236)	(247)	(280)
		(11,146)	(5,243)	(11,108)
Net current assets		4,728	8,209	6,612
Non-current liabilities
Borrowings		(1,181)	(581)	(1,213)
Deferred income tax liabilities		(658)	(209)	(686)
		(1,839)	(790)	(1,899)
Net assets		26,745	21,027	25,995
Shareholders' equity Capital and reserves  attributable to equity shareholders
Called up share capital		3,828	3,613	3,785
Share premium account		3,963	3,476	3,719
Merger reserve		2,671	-	2,671
Cumulative translation reserve		(459)	(397)	(567)
Retained earnings		16,742	14,335	16,387
Equity Shareholders' Funds		26,745	21,027	25,995

   Group Statement of Changes in Shareholders' Equity

		6 Months to 31 March 2008 Unaudited	6 Months to 31 March 2007 Unaudited	12 Months to 30 Sept 2007 Unaudited
		£000	£000	£000
Balance at beginning of period		25,995	19,113	19,113
Currency translation differences		108	(397)	(567)
Net income/(expense) recognised directly  in equity		108	(397)	(567)
Profit for the period		1,596	2,150	4,147
Total recognised income and expense		1,704	1,753	3,580
Employee share option schemes:
- Value of employee services		46	113	199
- Deferred income tax		(719)	467	717
- Proceeds from shares issued		287	85	371
Dividends		(568)	(504)	(785)
Shares issued on the acquisition of a subsidiary		-	-	2,800
		(954)	161	3,302
Balance at end of the period		26,745	21,027	25,995

  Group Cash Flow Statement

	Note	6 Months to 31 March 2008 Unaudited	6 Months to 31 March 2007 Unaudited	12 Months to 30 Sept 2007 Unaudited
		£000	£000	£000
Cash flows from operating activities
Cash generated from operations	7	1,914	1,939	6,547
Income tax paid		(592)	(1,120)	(2,691)
Net cash generated from operating activities		1,322	819	3,856
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired		-	-	(1,769)
Purchase of property, plant and equipment		(4,648)	(1,209)	(4,430)
Sale of property, plant and equipment		-	8	12
Purchase of intangible assets		(79)	-	-
Interest received		47	84	183
Net cash used in investing activities		(4,680)	(1,117)	(6,004)
Cash flows from financing activities
Proceeds from issue of ordinary shares		287	85	371
Repayment of borrowings		(173)	(123)	(229)
Interest paid		(262)	(79)	(263)
Dividends paid to ordinary shareholders		(568)	(504)	(785)
Net cash used in financing activities		(716)	(621)	(906)
Net decrease in cash, cash equivalents and bank overdraft		(4,074)	(919)	(3,054)
Cash, cash equivalents and bank overdraft at beginning of the period		513	3,791	3,791
Exchange gains/(losses) on cash and bank overdrafts		188	(210)	(224)
Cash, cash equivalents and bank overdrafts at the end of the period		(3,373)	2,662	513

 Cash, cash equivalents and bank overdrafts at the end of the period are made up of:

		6 Months to 31 March 2008 Unaudited	6 Months to 31 March 2007 Unaudited	12 Months to 30 Sept 2007 Unaudited
		£000	£000	£000
Cash and cash equivalents		3,577	4,560	5,428
Bank overdraft		(6,950)	(1,898)	(4,915)
Cash, cash equivalents and bank overdrafts at the end of the period		(3,373)	2,662	513

  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 and interpretations expected to be in issue at 30 September 2008.  

The Interim Report was approved by the Board of Directors and the Audit Committee on 11 June 2008. The Interim Report does not constitute statutory financial statements within the meaning of the Companies Act 1985 and has not been audited.  

In anticipation of changes required under IFRS, the Group has published an IFRS transition statement on 27 May 2008. The transition statement set out the effect of adopting IFRS for the Group, the basis of preparation, the accounting policies, and details of significant adjustments in respect of the opening Balance Sheet at 1 October 2006, the results for the year ended 30 September 2007, the results for the 6 months ended 31 March 2007 and the balance sheets at 31 March 2007 and 30 September 2007.

Comparative figures in the Interim Report for the year ended 30 September 2007 have been taken from the Group's audited UK GAAP statutory financial statements on which the Group's auditors, PricewaterhouseCoopers LLP, expressed an unqualified opinion and amended by adjustments required by IFRS.

All periods presented are unaudited.

The Interim Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 17 June 2008. 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

Six months to 31 March 2008

	Components & Materials	Instrumentation & Life Sciences	Corporate	Elimination	Total
	£000	£000	£000	£000	£000
Revenue
External customers	14,066	1,627	-	-	15,693
Inter-segment	1,628	72	-	(1,700)	-
Total	15,694	1,699	-	(1,700)	15,693
Segment expenses	(11,792)	(1,618)	(998)	1,700	(12,708)
EBITDA¹	3,902	81	(998)	-	2,985
EBITDA %	24.9%	4.8%	0.0%	-	19.0%
Depreciation	(348)	(26)	(148)	-	(522)
Operating profit before amortisation of acquired intangible assets	3,554	55	(1,146)	-	2,463
Acquired intangible assets amortisation	(218)	-	-	-	(218)
Operating profit	3,336	55	(1,146)	-	2,245

Six months to 31 March 2007

	Components & Materials	Instrumentation & Life Sciences	Corporate	Elimination	Total
	£000	£000	£000	£000	£000
Revenue
External customers	12,078	1,551	-	-	13,629
Inter-segment	1,551	100	-	(1,651)	-
Total	13,629	1,651	-	(1,651)	13,629
Segment expenses	(9,694)	(1,635)	(408)	1,651	(10,086)
EBITDA¹	3,935	16	(408)	-	3,543
EBITDA %	28.9%	1.0%	-	-	26.0%
Depreciation	(234)	(27)	(47)	-	(308)
Operating profit before amortisation of acquired intangible assets	3,701	(11)	(455)	-	3,235
Acquired intangible assets amortisation	-	-	-	-	-
Operating profit	3,701	(11)	(455)	-	3,235

¹EBITDA = Earnings before interest, tax, depreciation and amortisation

All of the amounts recorded in this Interim Report are in respect of continuing operations.

3    Income tax expense 

Income tax expense for the six months ended 31 March 2008 and 31 March 2007, respectively, has been estimated at prevailing rates. Taxation for the year ended 30 September 2007 is the actual provision for the year.

4    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:

	6 Months to 31 March 2008 Unaudited	6 Months to 31 March 2007 Unaudited	12 Months to 30 September 2007 Unaudited
	£000	£000	£000
Number of shares used for basic earnings per share	19,050,734	18,062,654	18,377,144
Dilutive shares	581,463	430,585	793,244
Number of shares used for dilutive earnings per share	19,632,197	18,493,239	19,170,388

A reconciliation of the earnings used in the earnings per share calculation is set out below:

	6 Months to 31 March 2008 Unaudited		6 Months to 31 March 2007 Unaudited		12 Months to 30 September 2007 Unaudited
	£000	p per  share	£000	p per  share	£000	p per  share
Basic earnings per share	1,596	8.4p	2,150	11.9p	4,147	22.6p
Acquired intangible assets amortisation (net of income tax expense)	157	0.8p	-	-	397	2.2p
Adjusted basic earnings per share	1,753	9.2p	2,150	11.9p	4,544	24.8p
Diluted earnings per share	1,596	8.1p	2,150	11.6p	4,147	21.6p
Acquired intangible assets amortisation (net of income tax expense)	157	0.8p	-	-	397	2.1p
Adjusted diluted earnings per share	1,753	8.9p	2,150	11.6p	4544	23.7p

Basic and diluted earnings per share before amortisation has been shown because, in the opinion of the Directors, it more accurately reflects the trading performance of the Group.

5    Cornhill and Dowlish Ford

In December 2006, the Group exchanged contracts and received a deposit of £75,000 for the sale of its Cornhill property in Ilminster. In May 2008 the prospective buyer forfeited their interest in the contract and the property is being marketed for sale.

In March 2008, the trading operations of Gooch & Housego (UK) Limited and the head office of Gooch & Housego PLC moved into new premises at Dowlish Ford. 

6    Dividend

		6 Months to 31 Mar 2008 Unaudited	6 Months to 31 Mar 2007 Unaudited	12 Months to 30 Sept 2007 Unaudited
		£000	£000	£000
Interim dividend paid: 1.5p per share (2006:1.4p)		-	-	281
Final 2007 dividend paid in 2008: 2.8p per share (2007:2.6p)		568	504	504
		568	504	785

The Directors have proposed an interim dividend of £270,000 for the year ended 30 September 2008 which is equivalent to 1.5p per share. This dividend has not been accounted for within six months period to 31 March 2008 as it is yet to be approved. 

7    Cash generated from operating activities

		6 Months to 31 March 2008 Unaudited	6 Months to 31 March 2007 Unaudited	12 Months to 30 Sept 2007 Unaudited
		£000	£000	£000
Profit before income tax		2,243	3,264	6,507
Adjustments for:
- Amortisation of acquired intangible assets		218	-	551
- Depreciation		522	308	706
- Loss/(profit) on disposal of property, plant    and equipment		15	(1)	6
- Share-based payments		46	112	199
- Finance income		(50)	(84)	(181)
- Finance costs		52	55	118
Total		803	390	1,399
Changes in working capital
- Inventories		(250)	(232)	(812)
- Trade and other receivables		956	(389)	(1,651)
- Trade and other payables		(1,838)	(1,129)	1,037
- Provisions for liabilities and charges		-	35	67
Total		(1,132)	(1,715)	(1,359)
Cash generated from operating activities		1,914	1,939	6,547

 

END

 

 

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