Interim Results
Gooch & Housego PLC
08 June 2005
FOR IMMEDIATE RELEASE 8 June 2005
GOOCH & HOUSEGO PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2005
'An excellent start'
Gooch & Housego PLC, the specialist manufacturer of acousto-optic and
electro-optic devices, precision optical components, crystals, and instruments
for measuring optical radiation, today announces interim results for the six
months ended 31 March 2005.
Financial Highlights
• Group turnover for the half year increased by 23% to £10.90m (2004:
£8.87m)
• Profit before tax * increased by 56% to £1.98m (2004: £1.27m)
• Basic earnings per share * increased by 48% to 7.4p (2004: 5.0p)
• Year end net funds of £0.43m (2004: net funds of £0.33m)
• Interim dividend increased by 8% to 1.3p (2004: 1.2p)
*after goodwill amortisation
Operational Highlights
• All Group companies performing well
• Optics and acousto-optics leading the way
• Production increased and leadtimes reduced
• Purchase of land and buildings in Ilminster for the development of a
new UK manufacturing facility and headquarters.
Gareth Jones, Chief Executive of Gooch & Housego, commented,
'We continue to be optimistic about the future. The quality, performance and
competitiveness of our products, which is demonstrated by our leading position
in several market sectors, underpins our confidence and is the basis for a range
of opportunities for organic growth. We are also looking out for acquisition
opportunities that complement our existing strengths and take us into new
markets.'
For further information:
Gareth Jones
Ian Bayer 01460 52271
Gooch & Housego PLC
Tim Thompson / Nicola Cronk
Buchanan Communications 0207 466 5000
Gooch & Housego PLC
Chairman's Statement - 2004/5 Interims
Overview
The Group has made an excellent start to the year with sales and profits for the
first half comfortably ahead of the same period last year. In the context of our
predictions for revenues to become more evenly distributed throughout the year
these results are in line with our expectations for the full year.
We started the year with strong order books across the Group as a result of the
surge in demand for our products in 2004. An unwelcome consequence of the
increased demand was that we also started the year with a backlog of overdue
shipments, and leadtimes became unacceptably high for some products. A levelling
off in demand combined with sustained higher production levels allowed us to
overcome the backlog and get leadtimes back to normal within a few months. The
greater output also provided a boost to sales during the first half-year.
All members of the Group have performed well. Demand for optical components at
Gooch & Housego in the UK (G&H) has been encouraging and prospects for further
long-term growth in this area are good. In acousto-optics, NEOS Technologies,
Inc. (NEOS) has managed to sustain the high level of sales and profits reached
last year, and this has been mirrored by a similar performance in the UK. At
Optronic Laboratories, Inc. (OLI) and Cleveland Crystals, Inc. (CCI) the
progress being made by both companies is reflected in increased profits.
Landwehr Electronic GmbH (LE) is performing in line with expectations, and at a
substantially higher level than they were last year pre-acquisition.
The purchase of land and buildings at Dowlish Ford, near Ilminster, in April
2005 for the development of a new UK manufacturing facility and headquarters
represents a significant milestone for G&H, providing scope for long-term growth
and investment in new plant and processes that has not been possible on the
current site. The search for a new site has been protracted and difficult but we
are now able to concentrate our efforts creating the new facility and reaping
the benefits that will flow from it.
The plot of land purchased in 2002 as a possible site for a new factory in
Ilminster, being no longer required, was sold in June 2005, realising a small
profit.
We have begun the process of identifying potential candidates for the position
of Chairman. Some preliminary discussions have taken place and we will be
holding further meetings in the coming months.
Financial Results
For the half-year to 31 March 2005, group turnover increased by 23% to £10.90m
(2004: £8.87m). Profit before tax, after charging goodwill amortisation,
increased by 56% to £1.98m (2004: £1.27m), basic earnings per share increased by
55% to 6.5p (2004: 4.2p) and basic earnings per share before goodwill
amortisation rose to 7.4p from last year's 5.0p.
The overall increase in sales was reflected across the whole Group. UK
operations showed an increase of £0.64m to £3.74m (2004: £3.10m).
The US group performed well despite flat sales for OLI at £1.45m (2004: £1.35m)
and also at CCI at £2.19m (2004: £2.19m). Sales at NEOS were up from £2.25m in
2004 to £2.48m in 2005, an increase of 7%. LE contributed sales of £1.04m in
its first six months.
Group operating profits before tax, but after charging goodwill amortisation of
£0.17m (2004: £0.15m) were up by 55% from £1.42m to £2.20m. In the UK
manufacturing operating profits were £1.18m compared to last year at £0.81m with
head office costs incurred of £0.34m (2004: £0.35m). The US companies all
reported increased operating profits with NEOS improving from £0.55m to £0.69m
and despite relatively flat sales both OLI and CCI managed to improve their
operating profit position. CCI saw increased profits of £49,000 to £0.41m while
OLI increased profits by £0.13m to £0.18m.
In its first six months since the acquisition LE contributed £72,000 to Group
profits.
The Group's financial trading position remains particularly strong with net
funds inflow, before net loan repayments, of £0.25m (2004: inflow £0.34m). The
company has net funds of £0.43m as at 31 March 2005 (2004: net funds of £0.14m).
An overall tax rate of 41.3% for the half year (2004: 40.8%) is again a result
of higher rates of US tax and the effect of the non-allowable charge of goodwill
amortisation.
Dividends
The Directors have declared an interim dividend of 1.3p to be paid on 15 July
2005 to all shareholders on the register at 17 June 2004. This represents an
increase of 8% when compared with the 1.2p paid last year. The shares are
expected to go ex-dividend on 15 June 2005.
Gooch & Housego
The new senior management team, established less than twelve months ago, has
been effective in increasing sales, reducing leadtimes and improving quality and
performance in all product areas. Q-switch leadtimes, running at 12 weeks or
higher in October 2004, were down to less than 2 weeks for standard products by
the end of March 2005. In parallel, the extra capacity created has been used to
meet the growing demand for custom Q-switches and focus efforts on increasing
sales of acousto-optic products other than the Q-switch. As expected, demand for
Q-switches has settled at a level that is below the peak reached in mid to late
2004, but which is nevertheless higher than it was at the same time last year.
In precision optics we have achieved notable successes in the specialised areas
of thin-film coatings and crystal optics. A substantial investment in the
coating department has increased capacity and allowed us to put concerted effort
into the development of coatings that are highly resistant to damage by high
power lasers, with the result that we are now achieving world-class levels of
performance. This is an enabling technology for the top-end optics business and
opens up several new opportunities. Further investment in coating plant is
planned in conjunction with the creation of a much larger facility in our new
factory. Our ability to produce optical components in crystalline materials,
particularly quartz, has long differentiated us from our competitors and recent
export sales successes confirm our world standing in this field.
Optronic Laboratories, Inc.
The changes introduced across the company in sales, manufacturing and product
development are beginning to have a beneficial effect. The sales and
applications engineering teams have been strengthened in order to provide
greater support for direct sales opportunities and to forge new Original
Equipment Manufacturer (OEM) relationships. In parallel, several new development
projects have been initiated with the aim of extending the product range and
broadening the customer base.
Cleveland Crystals, Inc.
CCI continues to be strong in its two main areas of activity - inertial
confinement fusion (ICF) crystals, and electro-optics/non-linear materials.
There is visibility of demand for ICF crystal growth and finishing from both US
and European customers extending at least eight years into the future. To meet
the forecasted requirements, plans are being made to install further production
equipment, which will require the allocation of additional space at the
Cleveland facility during the coming months.
In the electro-optic Q-switch market, CCI has been successful in consolidating
its leading position by focussing on quality and performance.
CCI are participating in the process of identifying the next generation of
products for the Group, and several opportunities relevant to the activities at
Cleveland are currently under investigation.
NEOS Technologies, Inc.
NEOS has maintained the momentum built up during 2004 with the result that sales
and profits for the first half-year are ahead of the same period last year.
Overall, demand has softened slightly during this period, as expected.
The acousto-optic activities of the Group at NEOS, G&H and LE are becoming
progressively more integrated. By addressing a single world market we are able
to focus our sales activities, balance demand and share development resources
across the Group in the most effective way. For example, NEOS are working
closely with LE on the development of the next generation of Radio Frequency
(RF) drivers, the first of which will go into production later this year.
The relocation to a new factory in October 2004 did not adversely impact on
output, while the improved and more spacious environment has enabled NEOS to
increase capacity and bring in additional production staff. Further management
appointments are planned in the coming months to strengthen the team in sales
and quality control.
Landwehr
LE has experienced an encouraging level of demand during the first half year,
with the result that sales and profits are on target. The integration of LE into
the Group is progressing well, with the only limitation being the availability
of resources within the senior team. To address this problem and bring the team
up to full strength in the areas of technical sales, applications engineering
and new product development two senior appointments have recently been made,
with a further two planned for later this summer. Several exchanges of personnel
have taken place between LE and other Group companies and several collaborative
initiatives are now underway. It is anticipated that inter-company
communications will continue increase as time goes by.
Prospects
Despite the expected softening of demand for the Q-switch following the surge in
2004 we continue to be optimistic about the future. The quality, performance and
competitiveness of our products, which is demonstrated by our leading position
in several market sectors, underpins our confidence and is the basis for a range
of opportunities for organic growth. We are also looking out for acquisition
opportunities that complement our existing strengths and take us into new
markets. Our efforts to establish a shared strategy and vision for the Group are
yielding benefits that range from cross-selling opportunities through to new
product development.
The constraints that have been imposed by cramped and inadequate facilities are
gradually being eliminated. The new facility at NEOS, expansion at CCI and the
imminent re-development of the new UK site are major steps forward and will
allow us to focus on extending our capabilities and increasing capacity. A
modest increase in investment in plant and equipment is planned.
Increasing the sales resource and its effectiveness in the context of a
Group-wide sales and marketing strategy continues to be a high priority. Further
sales and applications engineering appointments will be made at G&H, NEOS and LE
in the coming months, in addition to those that have recently been made. We
believe that there is scope to increase sales of existing products by bringing
them to the attention of a wider audience.
Substantial progress has been made in the search for new product opportunities.
Again, we are taking a Group-wide approach in which the aim is to match market
opportunities to the strengths of the Group. An objective is to move up the
value chain through the introduction of more instrument and systems level
products that build on our materials and components expertise. Several
initiatives have been launched that, if successful, will result in the release
of new products during the 2006 financial year.
I would like to express my thanks to the Directors and all employees of the
Group for their contribution to a successful first half year.
Gareth CW Jones,
Chief Executive Officer and Acting Chairman
8 June 2005
GOOCH & HOUSEGO PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 March 2005
6 months 6 months 12 months ended
30 September 2004
ended ended
31 March 31 March 2004
2005
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Turnover 10,899 8,866 18,812
Operating costs excluding goodwill
amortisation (8,703) (7,447) (15,122)
Goodwill amortisation (166) (151) (307)
Operating Profit 2,030 1,268 3,383
Other interest receivable and similar income 41 57 25
(86) (54) (110)
Interest payable and similar charges
Profit on ordinary activities before 1,985 1,271 3,298
taxation
Tax on profit on ordinary activities (820) (519) (1,235)
Profit on ordinary activities after taxation 1,165 752 2,063
Dividends on equity shares (234) (216) (648)
Retained profit for the financial period 931 536 1,415
Basic earnings per 20p ordinary share 6.5p 4.2p 11.5p
Diluted earnings per 20p ordinary share 6.4p 11.5p
Basic earnings per share before goodwill 7.4p 5.0p 13.2p
amortisation
Diluted earnings per share before goodwill 7.3p 13.2p
amortisation
Dividend per share 1.3p 1.2p 3.6p
GOOCH & HOUSEGO PLC
UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the six months ended 31 March 2005
6 months 6 months 12 months ended
ended ended
31 March 2005 31 March 30 September 2004
2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit for the financial 1,165 752 2,063
period
Currency translation differences on foreign
currency net investments (321) (480) (588)
Total recognised gains and losses for the
financial period 844 272 1,475
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
6 months 6 months 12 months ended
ended ended
31 March 31 March 30 September 2004
2005 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit on ordinary activities after taxation 1,165 752 2,063
Dividends in year (234) (216) (648)
931 536 1,415
Other recognised gains and losses (321) (480) (588)
Net addition to shareholders' funds 610 56 827
Opening shareholders' funds 13,563 12,736 12,736
Closing shareholders' funds 14,173 12,792 13,563
GOOCH & HOUSEGO PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2005
As at As at As at
31 March 2005 31 March 2004 30 September
2004
(unaudited) (unaudited) (audited)
£'000 £'000
FIXED ASSETS
Intangible assets 4,985 4,706 5,151
Tangible assets 4,402 4,112 4,239
9,387 8,818 9,390
CURRENT ASSETS
Stock 3,561 2,823 3,690
Debtors 3,537 3,372 3,395
Asset held for resale 525 - 525
Cash at bank and in hand 2,141 2,190 2,543
9,764 8,385 10,153
CREDITORS
Amounts falling due within one year (4,032) (3,583) (5,249)
NET CURRENT ASSETS 5,732 4,802 4,904
TOTAL ASSETS LESS CURRENT LIABILITIES 15,119 13,620 14,294
CREDITORS:
Amounts falling due after more than one year (774) (642) (559)
PROVISIONS FOR LIABILITIES AND CHARGES (172) (186) (172)
NET ASSETS 14,173 12,792 13,563
CAPITAL AND RESERVES
Called up share capital 3,600 3,600 3,600
Share premium 3,404 3,404 3.404
Revaluation reserve 308 308 308
Profit and loss account 6,861 5,480 6,251
14,173 12,792 13,563
GOOCH & HOUSEGO PLC
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2005
6 months 6 months 12 months
ended ended ended
31 March 2005 31 March 2004 30 September
2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net cash inflow from operating activities (i) 1,789 1,605 4,789
Returns on investments and servicing of finance
Interest received 17 12 25
Interest paid (53) (45) (90)
Interest element of hire purchase contracts (9) (9) (19)
Net cash outflow from returns on investments and
servicing of finance (45) (42) (84)
Taxation
UK tax paid (156) (78) (227)
Overseas tax paid (476) (528) (1,085)
Cash outflow from taxation (632) (606) (1,312)
Capital expenditure
Purchase of tangible fixed assets (414) (271) (1,101)
Sale of tangible fixed assets 1 14 13
Net cash outflow from capital expenditure and
financial investment (413) (257) (1,088)
Acquisitions
Acquisition of subsidiary (20) - (591)
Net overdraft acquired on acquisition - - (142)
Net cash outflow from acquisitions (20) - (733)
Equity dividends paid (432) (360) (576)
Net cash inflow before financing 247 340 996
Financing
New bank loan 197 - 399
Repayment of bank loan (550) (273) (719)
Capital element of hire purchase repayments (78) (77) (50)
Net cash outflow from financing (431) (350) (370)
(Decrease)/increase in cash in the period (ii) (iii) (184) (10) 626
GOOCH & HOUSEGO PLC
NOTES TO THE UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 2005
6 months 6 months 12 months
ended ended ended
31 March 2005 31 March 2004 30 September 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
(i) Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit 2,030 1,268 3,383
Amortisation of goodwill 166 151 307
Amortisation of debt issue costs 8 8 16
Depreciation 247 206 439
(Increase)/Decrease in stock (109) 495 (234)
Increase in debtors (235) (533) (528)
(Decrease)/Increase in creditors (318) 10 1,406
1,789 1,605 4,789
(ii) Reconciliation of net cash outflow to movement
in net funds in the period
Decrease in cash in the period (184) (10) 626
Cash outflow from decrease in debt and lease financing 430 350 370
Changes in net funds resulting from cash flows 246 340 996
New hire purchase contracts (128) (24) (40)
Movement in debt issue costs (8) (8) (16)
Debt acquired upon acquisition - - (375)
Translation difference (12) 145 74
Movement in net funds in the period 98 453 639
Net funds/(debt) at beginning of period 327 (312) (312)
Net funds at end of period 425 141 327
(iii) Analysis of net funds
At Cash flow Exchange Non-cash At
1 October 2004 Movement Movement 31 March 2005
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 2,543 (256) (146) - 2,141
Bank overdrafts (100) 72 - - (28)
(184)
Debt due after one year (370) (197) 34 (533)
Debt due within one year (1,412) 550 95 (8) (775)
Hire purchase (334) 78 5 (128) (379)
327 246 (12) (136) 425
GOOCH & HOUSEGO PLC
NOTES TO THE INTERIM STATEMENT
For the six months ended 31 March 2005
1. The financial information set our above does not constitute statutory
financial statements within the meaning of Section 240 of the
Companies Act 1985.
The summarised results for the six months ended 31 March 2005 and
comparative figures for the six months ended 31 March 2004 are unaudited. The
figures included for the year ended 30 September 2004 have been extracted from
the Group statutory financial statements, which have been filed with the
Registar of Companies and contain an unqualified audit opinion.
2. Taxation for the six months ended 31 March 2005 and 31 March 2004 has
been estimated at prevailing rates. Taxation for the year ended 30 September
2004 is the actual provision for that year.
3. The calculation of earnings per 20p Ordinary Share is based
on the profit on ordinary activities after taxation using as a divisor the
weighted average number of Ordinary Shares in issue during the year. For the
six months ended 31 March 2004 the actual number of Ordinary Shares in issue
throughout the year was 17,999,162.
The number of shares in issue throughout the current period was also
17,999,162, however, the Group issued a number of share options on 23 July 2004,
following the approval by shareholders of 'The Gooch & Housego Plc 2004 Share
Option Scheme' and as a result a diluted earnings per share has been disclosed
for the first time.
All share options in respect of which the related performance
criteria have been met as at 31 March 2005 and as at 30 September 2004 and which
have an exercise price lower than the average market price of the Group's share
price in the period since issue have been included in the calculation of diluted
earnings per share.
The weighted average number of shares in issue during the six months
ended 31 March 2005, taking into account of the dilutive effect of the
share options was 18,077,356, and for the year to 30 September 2004 was
18,001,508.
A reconciliation of the earnings used in the earnings per share
calculation is set out below:
6 months ended 31 6 months ended 31 12 months ended
March 2005 March 2004 30 Sep 2004
(unaudited) (unaudited) (audited)
£'000 p per £'000 p per £'000 p per
share share share
Basic earnings per share 1,165 6.5 752 4.2 2,063 11.5
Goodwill amortisation 166 0.9 151 0.8 307 1.7
Basic earnings per share before
goodwill amortisation 1,331 7.4 903 5.0 2,370 13.2
Diluted earnings per share 1,165 6.4 2,063 11.5
Goodwill amortisation 166 0.9 307 1.7
Diluted earnings per share before
goodwill amortisation 1,331 7.3 2,370 13.2
Basic and diluted earnings per share before goodwill
amortisation has been shown because, in the opinion of the directors, it
reflects the underlying performance of the group.
GOOCH & HOUSEGO PLC
NOTES TO THE INTERIM STATEMENT (CONTINUED)
For the six months ended 31 March 2005
4. All of the amounts reported in this Interim Statement are in respect
of continuing operations.
5. Accounting policies are consistent with those applied in previous
years and are as set out in the Group's audited statutory financial
statements at 30 September 2004.
6. The interim dividend will be paid on 15 July 2005 to shareholders on
the register at close of business on 17 June 2005.
7. Copies of the Interim Statement are available from the Company
Secretary, Gooch & Housego PLC, The Old Magistrates Court, Ilminster, Somerset
TA19 0AB.
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