TIDMGHH
RNS Number : 6754I
Gooch & Housego PLC
06 December 2022
For immediate release 6 December 2022
Gooch & Housego PLC
("Gooch & Housego", "G&H", the "Company" or the
"Group")
RESULTS FOR THE YEARED 30 SEPTEMBER 2022
Gooch & Housego PLC (AIM: GHH), the specialist manufacturer
of photonic components and systems, today announces its audited
results for the year ended 30 September 2022.
Year ended 30 September 2022 2021
Revenue (GBPm) 124.8 124.1
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Adjusted profit before tax
(GBPm)* 8.1 12.6
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Adjusted basic earnings per
share (pence)* 27.2p 41.0p
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Statutory (loss) / profit
before tax (GBPm) (2.3) 4.7
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Basic (loss) / earnings per
share (pence) (8.0)p 13.6p
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Total dividend per share (pence) 12.6p 12.2p
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Net debt excluding IFRS16
(GBPm) 12.8 2.6
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Net debt (GBPm) 19.1 9.2
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-- adjusted figures exclude the amortisation of acquired
intangible assets, impairment of goodwill and acquired intangible
assets, non-underlying items being restructuring costs, and CEO
succession costs, together with the related tax impact. A
reconciliation of adjusted figures to reported figures is given on
page 18.
Key points
-- Record order book of GBP147.7m, up 51% (35.3% excluding
foreign exchange) underpinned by strong end market demand.
-- Overall revenue unchanged with growth in both Industrial and
Life Sciences offset by decline in Aerospace and Defence.
-- Adjusted profit before tax declined to GBP8.1m . Investment
made to increase capacity but challenges with recruitment,
operations and supply chain constrained output .
-- Non-underlying charge of GBP10.4m, including GBP6.7m
impairment charge against goodwill and other intangible assets,
driven by increase in the Group's cost of capital. Reported loss
for the year of GBP2.3m.
-- Despite implementing price increases during the year, input
cost inflation continues to impact the business with some lag in
recovery.
-- Net debt increased to GBP19.1m, reflecting inventory
investment to alleviate supply chain shortages.
-- FY2023 outlook targeting revenue and adjusted PBT growth,
though at a lower level than previously assumed, through
accelerated R&D investment focused on key growth markets and
the addition of further capacity to service strong demand.
-- Full year FY2022 dividend increased to 12.6p, reflecting
strength in order book and medium-term positive outlook for the
business.
-- New CEO appointed and a review of the Group's strategy has
begun, with outcomes expected to be communicated with the half year
results.
Charlie Peppiatt, Chief Executive Officer, commented:
" While mindful of the uncertain macroeconomic and geopolitical
landscape, G&H is positioned for growth with a robust order
pipeline across all our end markets.
"I am confident we will generate growth in our financial and
operational performance in 2023 as we re-establish the foundations
and direction to progress to become a resilient and agile higher
margin business over the coming years."
For further information please contact:
Charlie Peppiatt, Chief Executive
Officer
Chris Jewell, Chief Financial Gooch & Housego +44 (0) 1460
Officer PLC 256440
Mark Court / George Cleary +44 (0) 20 7466
G&H@buchanan.uk.com Buchanan 5000
Christopher Baird / David +44 (0) 20 7597
Anderson Investec Bank plc 5970
Analyst Meeting and Webcast
A meeting for analysts will be held today at 9.30am at the
offices of Buchanan, 107 Cheapside, London EC2V 6DN. To register
attendance, please contact Buchanan at G&H@buchanan.uk.com
.
A live audio webcast of the meeting will be available via the
following link:
https://webcasting.buchanan.uk.com/broadcast/6360da52c1db5d073071d3ee
Following the meeting, a recording of the webcast will be made
available for replay at the Group's website at
https://gandh.com/investors/ .
2023 Expected Financial Calendar
Annual General Meeting 22 February 2023
Interim Results announcement June 2023
Financial Year End 30 September 2023
Announcement of results for the year ended December 2023
30 September 2022
Chairman's Statement
Group Overview
I have been pleased with the strength in demand for the Group's
products and services across all three of our markets. That demand
has pushed the Group's order book to record levels and reflects the
hard work of our engineering and sales team in building close and
mutually productive relationships with our customers. Our customers
trust us to support them in the development of their most
sophisticated, next generation products across all of the markets
that we serve. We are well positioned to benefit from the
increasing use of our photonic technologies to solve their most
technically challenging needs.
Whilst the Group has experienced significant headwinds in the
year to 30 September 2022 from supply chain issues and labour
shortages, we have continued to invest to establish firm
foundations upon which to deliver future growth in our productive
capacity, both in-house and with our supply chain partners.
Our ambitious programme to streamline our manufacturing
facilities is now starting to deliver. The significant investment
we have made in our precision optics centre of excellence in
Ilminster means that we are now able to offer our customers a
broader range of capabilities and the ability to provide them with
more advanced, integrated design consistent with our strategic
objective of securing more sub-system and system business. At the
same time the establishment of a fibre optics hub at our Boston MA
facility is reducing overheads and allows us to secure longer term
order book visibility for that site. I am delighted with the
performance of our Asian contract manufacturing partner. They have
assumed the manufacture of many of the acousto-optic products
formerly made in our Ilminster facility and in the final months of
the financial year have achieved an impressive ramp in product
output as they migrate from initial qualification build into
full-scale volume production. We intend to build upon this
relationship by migrating further mature products in the
future.
The Environment and our Communities
We are proud of the contribution that photonic technologies and
our products are making in the migration to a more sustainable and
healthier world. We are also focused on our own impact on the
environment. We track carbon emissions as one of our key
performance indicators and have achieved a very impressive 27.2%
reduction in our emissions in the year, thanks to the investments
we have made in solar energy generation at all of our UK
manufacturing sites and our policy of progressively switching to
purchasing energy from renewable sources. We have a programme in
place to achieve year-on-year reductions in our energy usage and
emissions in support of our target to be net zero on Scope 1 and 2
emissions by 2035.
We also recognise the importance of supporting the communities
in which we operate. As well as providing high quality, skilled
jobs we encourage our employees to support local charities, often
matching with G&H monies the amounts they raise.
The Board
After ten years with G&H, firstly as a non-executive
director and then for the last eight years as CEO, Mark Webster
retired at the end of the financial year. Mark led the Group's
transformation and expansion into new market opportunities,
especially in the Life Sciences and A&D sectors, and more
recently navigated the business through challenging international
economic times including the COVID pandemic.
We were delighted to appoint Charlie Peppiatt as CEO to succeed
Mark. Charlie brings a wealth of experience from his career in
global hi-tech businesses supplying into the Medical, Industrial
and A&D sectors, most recently at TT Electronics plc and before
that at Stadium Group plc and Laird plc. I believe Charlie is
uniquely qualified to lead the Group in exploiting the significant
opportunities arising from the continued growth of the photonics
sector.
Dividend
Given the strength of the Group's order book and the long-term
positive outlook for the business, the Board is proposing a final
dividend of 7.9 pence per share for approval at the Company's
Annual General Meeting on 22 February 2023, giving a total of 12.6
pence for the year. Payment of the dividend will be made on 24
February 2023, to shareholders on the register as at 20 January
2023.
People
I would like to thank our employees for their commitment to the
business. The Group has undertaken significant change as a result
of its manufacturing facility streamlining projects only made
possible by our employees' hard work and dedication. At the same
time, the constraints we have seen in the year from the very
competitive labour markets and further supply chain shortages put
extra pressures on our teams. I am also pleased we have been able
to welcome so many new recruits to the G&H team due to the
strength of the Group's order book and our work to increase our
productive capacity. We are proud to be able to provide high
quality employment opportunities to people at all stages in their
career in the locations in which we operate.
Outlook
Looking ahead, the prospects for G&H are good. We are well
positioned in our growth markets. Our restructuring programmes have
reduced the Group's cost base. Whilst the business faced some
significant challenges during the year from supply chain issues and
the very competitive labour markets in both the UK and US, in the
latter stage of the year we have succeeded in adding significant
additional capacity and that ongoing investment will bear fruit in
the coming years. In FY2023, we are targeting growth in revenues
and adjusted PBT, though at a lower level than previously
assumed.
Our technology and products are world class, our customer
positions are strong and with the support of our skilled and
talented employees I am confident we will be able to deliver upon
our financial growth targets.
Gary Bullard
Chairman
6 December 2022
Chief Executive Officer's Statement
Introduction
I am delighted to have joined G&H in September 2022 at such
an important time in the Group's development. In my first few weeks
with the business I have been able to visit all of our principal
locations and have been struck by the dedication, motivation and
deep technical skills of our teams. It is clear that G&H
products are recognised by our customers for their superior
technical capability and quality which few other companies can
match. However, I am also conscious that our operational delivery
to those customers over the last year has not met the high
standards we aspire to and I will be focused on ensuring we quickly
resolve the operational constraints that have impacted the business
during FY2022.
I intend to complete a review of the Group's strategy over the
coming months and will provide further details once that has been
concluded. Already I can see that the business is well positioned
in a number of growth markets with superior products and
capabilities meaning we should be able to secure a growing share of
those attractive end markets. The Group's production facilities are
well invested with advanced hi-tech equipment and the business has
established productive relationships with its existing customers,
as well as positive engagements with many new customers, as we seek
to collaboratively develop the next generation of photonic
products.
I am proud that G&H products are playing a part in building
a better more sustainable world. Many of our products contribute
directly to the reduction of energy consumption and the more
efficient use of materials. In our own facilities we are also
making great strides in reducing our impact on the environment. In
FY2022 we achieved a 27.2% reduction in our emissions as we work
towards our goal of being net neutral on our Scope 1 and 2
emissions by 2035.
Business Performance
During the financial year 2022 G&H achieved revenue of
GBP124.8m, representing an increase of 0.6% over previous year
(FY2021: GBP124.1m), or excluding the impact of foreign exchange a
reduction of 3.7%. Adjusted profit before tax was GBP8.1m, a
reduction of 35.4% over last year (FY2021: GBP12.6m). At the same
time, and in common with many other businesses in our sector, we
saw high levels of customer demand which increased the Group's
order book to GBP147.7m, an increase of 51% or 35.3% at constant
currency.
This weaker trading performance was the result of significant
headwinds in our production facilities as they attempted to
increase output from a new footprint to our industrial and medical
laser markets where demand was very strong and which provided the
opportunity to offset programme driven reductions in our A&D
facing businesses. In the first half of the year our manufacturing
facilities were materially impacted by COVID absences while the
very tight labour markets in both the UK and US meant that we were
unable to make the necessary increases to our in-house production
teams. At the same time, we experienced a number of supply chain
shortages especially in the area of electronic components.
However, in the second half of the year we were able to achieve
better success in adding to our production teams thanks to
increased flexibility and innovation in the ways in which we sought
to attract new recruits to the business.
Nevertheless, due to the constraints on output, the programme of
investment in both our operations and R&D functions, input cost
inflation and the conclusion in the prior year of a number of
profitable A&D programmes meant that the Group's overall
margins declined. The continued competitive nature of hiring,
training and retaining the required level of staff in key technical
and production positions remains a challenge in the current labour
market and this is expected to continue into the first half of
2023. At the same time our supply chain remains unpredictable and
whilst we have generally been successful in passing on the effects
of input cost inflation to our customers we remain very alert to
the impact of the continuing current high inflation environment
that our businesses are operating in.
Our markets
Industrial demand continues to be strong, especially the
semiconductor and industrial laser markets, where underlying market
growth was complemented by very good uptake of new G&H products
launched in those market areas. Demand for our hi-reliability fibre
couplers remained robust, with the use of those products in the
growing satellite communications market complementing the
long-standing undersea cable business.
Life Sciences performed resiliently and we saw significant
growth in demand for our products used in medical lasers with
particularly strong growth for devices that support aesthetic
procedures in the Asian market. We are currently adding productive
capacity in our Cleveland facility to help address this growing
need. At the same time demand for our medical diagnostic products
was broadly stable compared with the prior year.
Volumes in our Aerospace & Defence ("A&D") markets
declined significantly as a result of a number of programmes being
completed in late FY2021 and early FY2022, most significantly for
the supply of sighting systems for armoured vehicles. Whilst the
business has been successful in securing a number of new programme
wins, most notably the upgrade of the optical sensor suite for UK's
Challenger platform, those programmes have not yet migrated into
volume production. At the same time programme volumes supplied from
our Boston site declined, but this business finished the year with
an order book some 58% higher than the same time last year and is
therefore substantially covered for its coming year revenues.
The transfer of our acousto-optic products from our Ilminster
facility to our Asian contract manufacturing partner is now
complete and despite some delay this supplier achieved a
significant ramp up in output in the final quarter of the year. We
are now qualifying that same partner for the manufacture of
hi-reliability fibre couplers and expect them to complete that to
become a third source for the manufacture of this growing product
line in the coming financial year. We are looking at further
opportunities to outsource several other established products in
the future.
We have continued to invest in our technology roadmaps and are
working closely with many of our customers on their next generation
products. New products contributed GBP17.9m of revenue in FY2022
(FY2021: GBP18.1m).
The Group took deliberate steps to invest in higher levels of
inventory as a risk reduction exercise given the difficult supply
chain environment we continue to face and we expect these safety
stock levels to be maintained during the coming financial year.
Consequently, the Group's net debt increased to GBP12.8m, excluding
lease liabilities, or GBP19.1m when lease liabilities are added.
Our leverage as measured for our banking covenant stands at just
0.7x, which places G&H in a strong position to pursue our
strategic goals.
Strategic Goals
The Group's medium-term strategic goal of diversifying into the
A&D and Life Science markets has demonstrated considerable
success over the past few years with around half of the Group's
revenues now coming from those two markets, counter-balancing our
exposure to the more cyclical segments of certain parts of the
Industrial market. Those two markets also have specific regulatory
and compliance barriers to entry that make them attractive to
G&H.
We use our research and development resources to help us secure
a greater proportion of our business from sub-assemblies and
systems. In order to do so, we are increasingly focusing our
engineering skills from across the Group to demonstrate our ability
to develop more complex designs. For example, by combining the
hardware and firmware capabilities of our optical systems design
team in St Asaph with the electronics and software skills of our
Ashford engineering team we are able to offer next generation
multi-band sights incorporating laser range finding and advanced
image overlay for use in next generation optical systems for
military vehicles. Our continuing investment in state-of-the-art
equipment to manufacture and coat precision optics means that we
are able to offer our customers an expanded range of services and
in turn we are being invited to tender for more complex, innovative
optical assemblies by both existing and new customers.
We have and will continue to substantially improve our software,
firmware, electronic and mechanical engineering capabilities. This
was in large part initiated through the acquisition of Integrated
Technologies Limited ("ITL") and its facility in Ashford, Kent has
provided a platform for the creation of a systems engineering
hub.
Moving up the value chain through greater vertical integration
by expanding our modules, subsystems and full photonics solutions
offering represents a significant opportunity for the Group. We
will continue to substantially improve our software, firmware,
electronic and mechanical engineering capabilities through our
innovation hubs.
Nevertheless, I intend to complete a review of the Group's
strategy over the coming months to ensure that the business is
focussed in the right product development areas and aligned to
customer-led growth drivers. I also intend to review investment
levels to assess this is at the level required to develop higher
margin product lines in a timely manner to support the business'
growth aspirations.
Our Operations
The Group has continued to record low levels of lost time
accidents and below the average for our sector. Across all our
sites we remain focused on ensuring that G&H is a safe,
engaging, diverse and inclusive place to work.
During the year, we have operated in very competitive labour
markets working hard to both retain and, where required, to add to
our production teams. For much of the year we found that our
recruitment activities were only sufficient to replace attrition
but in the second half of the financial year we started to achieve
net increases in our production team strength. We have further
roles to fill to meet required output levels and have hired
specialist in-house recruiters to help us expedite this critical
task.
During the year, John Andzulis joined the business as our new
Chief Operating Officer. John has a wealth of industry knowledge
having held senior operational leadership roles for Ametek,
Novanta, Thermo Fisher Scientific and Rochester Precision Optics.
Under John's leadership our Operations team have been focused on
establishing the operational capabilities needed to improve our
on-time delivery performance, drive continuous improvement
activities to increase efficiency and achieve the growth in overall
capacity required to enable us to deliver our record order book and
meet future growth requirements.
We have invested to help ensure our Asian contract manufacturing
partner executes on the growing volumes we are transferring to
them. We currently have four team members permanently located at
their facility assisting them with new product qualification,
scheduling the output of our products being manufactured there and
the quality of the product delivered on our behalf to customers. We
have also added to our team of supplier quality engineers who are
charged with executing upon a risk-based audit programme of our
supply chain which over time will help to reduce supply chain risks
across our portfolio.
Research and Development (R&D)
G&H continues to work closely within the photonics ecosystem
and with a number of key partners to develop their next generation
products. During FY2022 we introduced 54 new products and delivered
GBP17.9m of revenue.
Some of our principal areas of new business opportunities
are:
-- Leading photonic components and modules for extreme
ultra-violet (EUV) lithography equipment in semiconductor
fabrication and other advanced microelectronics processing.
-- Fibre-optic modules and sub-systems for lidar sensing in wind energy.
-- Fibre-optic and opto-mechanical sub-systems for next-generation space to ground satellite communication.
-- Biomedical imaging systems for cancer and cardiovascular disease detection.
-- Photonics system solutions for ophthalmology scanning equipment.
-- Optical components for gimbals in UAV military platforms.
-- M ulti-band periscopes and sighting systems for armoured vehicles.
Corporate Responsibility
The Board is accountable to its shareholders and is committed to
the highest standards of corporate governance. To this end the
Group has adopted the UK Corporate Governance Code (2018). In order
to ensure the Group is meeting the most up to date standards,
regular reviews of policy are held by the relevant committees of
the Board of Directors. During the year the Board undertook a
self-assessment to identify opportunities for improvement and
incorporate a greater focus on ESG.
G&H is committed to creating a safe, engaging, diverse and
inclusive place to work for the Group's employees and all
stakeholders. We continue to establish a culture that proactively
works towards reducing harm and promotes equality, diversity and
inclusion across the Group. The Group remains focused on providing
equal employment opportunities for all and aims to improve
diversity at all levels of the organisation. Our recruitment
partners have been instructed to ensure that they include female
candidates in all shortlist applications and we are actively
engaged with encouraging International Women in Engineering. We are
currently recruiting for a new non-executive director from a female
only short list.
G&H is committed to conducting our business in an
environmentally responsible and sustainable manner. With the
appointment of our new non-executive director we intend to
establish an ESG subcommittee of the Board responsible for
monitoring the Group's achievement against its ESG targets. We are
investing in order to generate our electricity in a sustainable
manner and to reduce our overall energy usage. Each of our sites
has an energy reduction plan that it is working to. In the year we
reduced our scope 1 and 2 carbon emissions by 27.2% and major step
forward in achieving our target of being net neutral on this
measure by 2035. The executive directors and senior leadership team
now have specific environmental management and carbon reduction
goals in their remuneration schemes.
Outlook
The demand fundamentals across all three of our primary markets
in FY2022 was strong and this has continued into the start of the
new financial year.
In A&D we secured significant new programme wins and we can
see that the conflict in Ukraine has reinforced the continuing
importance of armoured systems in modern warfare. We are starting
to receive opportunities from programmes that will replenish
equipment provided to Ukraine.
In Life Sciences our medical diagnostics business was broadly
flat as volumes on elective surgery treatments and cancer care
products compensated for declines in ventilator systems which had
benefited from the pandemic. In the medical laser market demand was
strong for our components used in aesthetic procedures responding
to significantly growing demand, especially from Asia.
We saw a sustained recovery in the demand for specialist
industrial lasers, as new technologies to support the 5G
infrastructure and Internet of Things applications continue to
expand, along with the greater use of new more flexible materials
in microelectronic manufacturing and strong worldwide requirements
for advanced semiconductors continue to drive growth.
Strategic geopolitical tensions between East and West has
accelerated the selective re-shoring of strategically important
capabilities such as semiconductor production which in turn is
fuelling the demand for the fit out of new hi-tech semiconductor
factories. We expect this demand driver to remain in place through
the medium-term providing G&H with further growth opportunities
as well as offering some offset should end consumer demand in the
more traditional industrial equipment market start to soften.
These factors all contributed to the Group's order book rising
to a record level of GBP147.7m at the end of the year, an increase
of 35.3% on a constant currency basis. Despite the strength of the
order book which remains well above historic levels across the
business and provides excellent visibility for 2023, we still face
some significant operational headwinds in the near term. The labour
markets in both the UK and US remain highly competitive leading to
ongoing supply side challenges that continue to frustrate the
recruitment of the required talent, especially in certain technical
positions.
Whilst price increases have been passed onto customers in FY2022
to address the input cost increases, cost inflation continues to
impact the business. Due to the nature of the ongoing inflation
dynamics there is some lag in recovery and prices need to be under
constant review to recover these costs.
While mindful of the uncertain macroeconomic and geopolitical
landscape, G&H remains well positioned for growth with a robust
pipeline across all our end markets. We anticipate higher
production in 2023 and a refocus on pricing to offset inflation as
we convert our record order book. The business will invest to
ensure G&H can capitalise on the accelerating deployment of
photonics technologies into continuously expanding areas of the
Industrial, Life Sciences and A&D markets underpinning the
future growth potential of the Group . As a result, in FY2023 we
are targeting growth in revenues and adjusted PBT, though at a
lower level than previously assumed.
I am confident we will generate growth in our financial and
operational performance in 2023 as we re-establish the foundations
and direction to progress to become a resilient and agile higher
margin business over the coming years.
Charlie Peppiatt
Chief Executive Officer
6 December 2022
Operations Review
Industrial
Revenue GBP64.6m (2021: GBP55.6m)
Adjusted Operating Profit GBP8.4m (2021: GBP7.1m)
Operating Profit GBP7.3m (2021: GBP4.5m)
Percentage of Revenue 51.7% (2021: 44.8%)
Market Drivers
-- National security considerations driving in-country
investment in semiconductor and other electronics manufacturing
facilities.
-- New more flexible materials in microelectronic manufacturing.
-- Next generation products such as EUV lithography lasers for
nanoelectronics and new design germanium modulators.
-- Increasing investment in continental connectivity of data
centres to satisfy growing internet use.
-- Greater use of our hi-reliability fibre optic technology in space satellites.
-- Increased investment in wind farms and border and
infrastructure asset protection, both using a version of our 'laser
engine' sensing technology.
Performance
Overall, sales of products into our Industrial markets grew by
16.2% (10.5% excluding foreign exchange) compared to the prior
year. We saw further growth in our Industrial laser and
semiconductor revenues thanks to the continuing investment in
additional semiconductor facilities, partially driven by growing
concerns about dependence upon supply from some Asian sources. The
roll out of new technologies such as 5G, along with greater use of
new materials in microelectronic manufacturing, continue to provide
underpinning demand. Demand for our recently developed germanium
acousto-optic modulator product is very strong. Having completed
all development activities on this product we are now focused on
ramping our build capacity. The outsourcing of 'runner' AO Q-switch
production to our South East Asian manufacturing partner has proven
successful with them significantly increasing their output in the
final quarter of the financial year. This is enabling us to more
effectively compete in the increasingly price sensitive Asian
Q-switch market. We are now in the process of outsourcing some
fibre optic product to supplement the acousto-optic product already
transferred.
Revenue from our sensing markets declined marginally during the
year as a result of the status of the end customer programmes.
Nevertheless, the underlying trend remains in our favour with
photonics sensing products increasingly seen as the way to protect
and improve the efficiency of infrastructure assets. For example,
G&H products are used extensively to improve the performance of
wind turbines used for clean energy generation and the focus on
switching to energy created from renewable sources provides G&H
with sustainable demand for its products in this area. We expect
the increased deployment of wind turbines in the US to generate
clean energy to act as the next significant growth driver for our
sensing modules used in this application. In early FY2023 we have
received further significant orders for our sensing modules used in
infrastructure protection and this provides good early visibility
to support the expected revenue growth in this area in FY2023.
Volumes for our hi-reliability fibre couplers used in undersea
cable networks remained at the raised level seen in FY2021. There
is strong demand due to a sustained market drive for the
transmission of more and more data for both business and personal
consumption and the greater use of the same technology in space
satellites. Our strong customer relationship with the principal
fibre laying companies mean that we are well placed to maintain or
increase our share of a growing market and the technology
demonstration completed with NEC/JAXA established our credibility
as a supplier of modules for laser-based space communication
systems.
Applications
-- Industrial lasers for materials processing applications.
G&H supplies Q-switches and other acousto-optic, electro-optic
and fibre optic products.
-- Semiconductor for lithography and test and measurement applications.
-- Metrology for laser-based, high-precision, non-contact measurement systems.
-- Optical communications specifically for high reliability and high-performance applications.
-- Remote sensing for applications including asset protection,
perimeter security, strain, temperature and pressure sensing.
-- Scientific research the largest proportion being nuclear
fusion research and energy - laser technology is being used to
recreate the conditions found in the core of the sun.
Growth Strategy
-- To work in collaboration with our customers to invest in
R&D and process engineering in order to develop products that
meet their most demanding needs.
-- To bring to the market new products and to ensure that we
remain at the cutting edge of technology in this important area.
During FY2022 G&H introduced six new products in Industrials
generating GBP7.9m of revenue. We have transitioned into production
on a multi-year contract with a laser system company supplying the
next generation of Extreme UV lithography lasers for production of
atomic level nanoelectronics.
-- To focus on niche markets that play to the strengths of
G&H, principally those that demand high levels of quality and
reliability, typically requiring technically challenging design and
engineering input incorporating a range of our products. Those
markets may require survivability in harsh environments.
-- To expand into and develop new geographical markets offering
high growth opportunities, through leveraging and expanding the
Group's global sales organisation. During the year we added to our
Asian sales team so as to be able to exploit the growing market
demand we see in that region.
-- To continue to focus our energies and investment on making
the transition from a components supplier to a manufacturer of
subassemblies, instruments and systems, where appropriate.
-- To maintain the strong relationships we have with our
customers' development teams to ensure we are their preferred
choice for supporting them in developing their next generation
products.
A&D
Revenue GBP30.6m (2021: GBP41.1m)
Adjusted Operating (loss) / profit GBP(2.7)m (2021: GBP3.1m)
Operating (loss) / profit GBP(3.4)m (2021: GBP0.6m)
Percentage of Revenue 24.5% (2021: 33.1%)
Market Drivers
-- A&D is transitioning to photonic components and systems
across a broad range of sub-sectors to secure size, weight, power
and reliability benefits.
-- IR optical arrays deliver targeting, range finding,
navigation and surveillance capabilities for the growing UAV
market.
-- Similar capability combined with photonic sensor suites are
now being used across a range of remotely controlled A&D
systems for land, sea and air.
-- Space satellite systems developed by G&H have the ability
to be deployed across a range of standard satellite, constellation
satellite and near space UAV systems.
-- Optical systems used in armoured vehicles are being developed
with additional digital capability.
-- Directed energy systems require optical and laser expertise where G&H excel.
Performance
Our A&D revenues declined by 25.6% during FY2022, compared
with the equivalent period last year, and 29.0% on a constant
currency basis. In the prior year, we completed deliveries of
optical sensor systems on several significant vehicles programmes
and our new contract wins have not yet migrated to the volume
production phase. However, our order book for our A&D business
is strong, increasing 41.4% on a constant currency basis during
FY2022. We have secured a significant position on the UK MoD's
Challenger upgrade programme as well as important new programme
wins for our Boston business.
We are also opening new customer positions for our gimballed
optical arrays from our Keene, NH business in both Europe and Asia.
At the same time the Ukraine conflict is driving an increase in
quoting activity as European nations look to replenish military
vehicle stocks being supplied to the Ukrainian armed forces.
After recording significant programme revenues in FY2021 on the
NEC/JAXA laser-based communication programme, work has continued
with that customer but at a lower level. The focus with that
customer is now on high power optical amplifiers. We are also
working with another partner on amplifiers for laser
transmitters/receivers that would be integrated in to unmanned
aerial vehicles (UAVs) providing optical communications both with
other UAVs and with the ground. Whilst these projects are currently
still at prototyping stage we are positioning ourselves strongly
with a number of customer primes in a market space that is expected
to develop significantly in the coming few years.
Our teams are also closely engaged on the development of
Directed Energy Systems with a number of prime contractor
customers. G&H's expertise in coating the large optics that are
positioned at the heart of these systems means that we are well
positioned to secure recurring production revenues once development
activities are complete.
In the commercial aerospace market we have seen some recovery in
volumes following the lows of FY2020 and FY2021. We believe as we
increase our capacity at our Moorpark, CA facility we will be able
to secure a larger share of the available market.
Applications
-- Target designation and range finding used on both land-based and airborne systems.
-- Guidance and navigation components for ring laser gyroscope
and fibre optic gyroscope inertial navigation systems.
-- Countermeasures for ground-based systems and airborne platforms.
-- Space photonics G&H is leveraging its heritage of
ultra-high reliability components for space applications in order
to address the growing market for laser-based space
communications.
-- Periscopes and sighting systems for land based armoured fighting vehicles.
-- Opto-mechanical subsystems for unmanned aerial and ground vehicles.
-- Directed Energy systems for military platform and infrastructure defence applications .
Growth Strategy
-- To continue to invest to move up the value chain from being a
components supplier to a subsystems provider. Our customers are
changing their business models and are looking for further
outsourcing opportunities to companies such as G&H that are
capable of providing broader solutions.
-- Further upgrading of our manufacturing processes and
engineering in order to meet the needs of our customers. The
continued investments made in new surface polishing and coating
equipment for our Precision Optics centres are evidence of our
intent to secure further market share in this sector.
-- To introduce a greater number of new products, including
products which look to fill a market need, in a managed and
cost-effective way, as well as take on projects with a high
technical content initiated by our customers. During FY2022 G&H
introduced thirty-nine new products and generated GBP6.3m of
revenue from new products that addressed the A&D market
including space satellite laser-based communication systems, new
sighting systems and IR lens assemblies for UAVs.
Life Sciences/Biophotonics
Revenue GBP29.7m (2021: GBP27.4m)
Adjusted Operating Profit GBP4.0m (2021: GBP4.2m)
Operating Profit GBP3.7m (2021: GBP3.5m)
Percentage of Revenue 23.8% (2021: 22.1%)
Market Drivers
-- Strong growth in laser enabled aesthetic procedures especially from Asia.
-- A larger, more affluent worldwide middle class influenced by
social media and eager to access cosmetic and aesthetic
procedures.
-- A strong, government driven programme within China to develop
an indigenous life sciences sector, reducing its dependency upon
Western equipment and technologies.
-- A growing aging population demanding a shift towards early
diagnosis rather than later, more serious treatment of undetected
conditions.
-- More point of care and personalised medicine drives demand for volume diagnostic products.
-- New applications for optical coherence technologies.
Performance
Our Life Sciences/Biophotonics revenue grew by 8.2% in the year
to 30 September 2022, compared with the prior year. When measured
at constant currency this represents growth of 5.3%. Medical
diagnostic demand remained broadly flat compared to the levels seen
in FY2021 with new customer programmes compensating for a reduction
in volumes of the product designed to improve respiratory function
as part of a ventilator system which had benefited particularly
from the pandemic.
Our ITL business which serves this medical diagnostic market
secured important new orders from customers seeking our expertise
to productionise medical diagnostic product concepts. In line with
our established business model, we expect a number of these
programmes to migrate to recurring production revenues once the
initial work to develop producible product has been completed. We
have expanded the medical diagnostics R&D group to meet the
demand and we are exploiting the electronic and mechanical
engineering capability of the ITL team to support other development
activities in G&H's A&D business sector.
Through ITL's small sister company in the US we are seeking to
secure additional revenues from the large North American medical
diagnostic market. We have recently opened a new larger facility
for that team which will mean we can better serve incremental
demand from ITL's North American customers who frequently prefer
product made in the USA.
Demand for our specialist medical laser products, was very
strong in the year both from our established US and European
markets but also more significantly from Asia. Medical lasers using
our components are able to provide new cosmetic procedures to
patients, for example to significantly clear acne scarring. Volumes
increased by just over 10% in the year, excluding foreign exchange
and we project future strong growth in FY2023 in this area,
supported by additional capacity that we are bringing on line in
our Cleveland, OH facility.
Applications
-- Optical coherence tomography (OCT) primarily used in retinal
imaging for the diagnosis of glaucoma and macular degeneration, but
also now used in the detection of cardiovascular disease and cancer
diagnostics.
-- Laser surgery used in a wide range of applications including
prostate surgery, scar correction, cataract surgery, freckle, mole
and tattoo removal as well as wrinkle reduction and teeth
whitening.
-- Microscopy: Modern, laser-based techniques are revolutionising the field of microscopy.
-- Medical diagnostic instruments: G&H has a range of
capabilities including full product development, design,
manufacturing, certification and after sale service for the
commercialisation of high-quality medical diagnostic, in vitro
diagnostic (IVD) devices, precision analytical, electro-mechanical
and laboratory instruments.
Growth Strategy
-- To continue to invest in R&D projects in close
collaboration with our customers, to develop the existing portfolio
of products and to ensure that they remain competitive. During
FY2022 G&H introduced nine new products and generated GBP3.7m
of revenue from products that address its life
sciences/biophotonics market, especially in the medical
instrumentation market.
-- Where appropriate to sell the full range of our Life
Sciences/Biophotonics products to a wider range of customers.
-- To invest in new business development and engineering
resources located in our ITL North American facility to secure a
greater share of the large North American medical diagnostic
market.
-- To utilise our systems capability to present our breadth of
technologies as part of subsystems or systems.
-- To make strategic acquisitions that are synergistic and complementary to our existing Life Sciences/Biophotonics business, to help us build "critical mass" in this sector. G&H continues to seek acquisition opportunities and has the financial resources to execute on that strategy as it develops.
Financial Review
Overview of the Year
Despite strong levels of demand seen during the year across all
three of our market segments, the Group encountered significant
constraints in putting in place the capacity needed to deliver on
this record order book, especially in the first half of the
financial year. COVID absences continued to impact our facilities
and there was further tightness in many areas of our supply chain
which meant that we were frequently unable to deliver to our
customers on time and in full. As a result, the Group was unable to
offset from those areas of the business seeing significantly
increasing orders the declines it experienced elsewhere from some
programmes, especially in its A&D markets, coming to an end.
Consequently, whilst revenues increased on the prior year by 0.6%,
on a constant currency basis they declined by 3.7%.
In the second half of the financial year the actions put in
place to increase capacity meant that revenue grew by 21.6% on a
constant currency basis providing a solid platform for further
revenue growth in FY2023.
We saw further growth from our Industrial markets and revenues
from our Life Sciences products and services remained at the high
levels seen in the previous financial year. In our A&D sector
revenues declined compared to the prior year given the phasing of
programme deliveries, especially our deliveries of sighting systems
on to armoured vehicles programmes. However, the year saw the
business secure some significant new programmes in this area most
notably in connection with the MoD's Challenger upgrade
programme.
Our order book stood at GBP147.7m at the end of the financial
year and intake exceeded revenue by 20.5% in the second half of the
year providing good visibility for future revenue growth.
The decline in A&D volumes combined with our continuing
investment meant that the Group's adjusted profit before tax
reduced to GBP8.1m (2021: GBP12.6m) representing a margin of 6.5%
(2021: 10.2%). Adjusted profit before tax is a key alternative
performance measure by which the Board evaluates the Group's
performance as it better represents the underlying trading of the
Group with restructuring costs and amortisation and impairment
charges associated with acquired intangible assets excluded from
this measure.
During the year we redefined the cash generating units (CGUs) to
which the Group's goodwill and other assets are allocated and their
recoverable amounts assessed by references to those CGUs' future
forecast cashflows. This change arose as a result of the transition
of our Operations team from a technology based model to a
regionally based model. Many of the Group's support functions also
operate on a regional rather than capability based model. The CGUs
identified for the financial year were, therefore, our UK sites,
our US sites and our ITL sites given the different nature of our
ITL business from the remainder of the Group.
The non-underlying charges excluded from our adjusted profit
before tax totalled GBP10.4m. The most significant item related to
an impairment charge of GBP6.7m taken in respect of goodwill and
acquired intangible asset balances held within our UK Cash
Generating Unit. This was driven by an increase in the discount
rate applied to future expected cashflows as a result of recent
increases in both the costs of borrowing and the assessment of
market risk. Had the discount rate applied remained the same as the
prior year, no impairment charge would have been recorded. Further
details of alternative performance measures are provided later in
this review. After the impact of adjusting items the Group's full
year statutory loss before tax was GBP2.3m compared with a profit
of GBP4.7m in the prior year.
During the year we have taken steps to invest further amounts in
our strategic safety stocks in order to better protect our
production programmes from the pressures we are currently seeing in
our global supply chains. Given the increased trading volumes in
the final quarter of the financial year our receivable balance also
increased compared to the prior year end and this has supported
strong cash collections in the first period of trading of the new
financial year. Whilst there was some offset from payables across
the year, the Group invested a further GBP10.0m in working capital
in the financial year (2021: reduction of GBP0.5m). Investment in
our production facilities continued with total capital investments
of GBP8.6m made in the year (2021: GBP6.2m). Our net debt excluding
lease liabilities totalled GBP12.8m (2021: GBP2.6m) representing
leverage of just 0.7x meaning we remain well placed from our debt
facilities to fund our acquisition strategy. We expect the Group's
net debt levels to reduce across FY2023.
Revenue
REVENUE
-------------------------------------------------------------------
2022 2021
----------------- -------------------
Year ended 30 September GBP'000 % GBP'000 %
--------------------------- -------- ------- -------- -------
Industrial 64,553 51.7% 55,552 44.8%
--------------------------- -------- ------- -------- -------
A&D 30,553 24.5% 41,089 33.1%
--------------------------- -------- ------- -------- -------
Life Sciences/Biophotonics 29,696 23.8% 27,433 22.1%
--------------------------- -------- ------- -------- -------
Group Revenue 124,802 100.0% 124,074 100.0%
--------------------------- -------- ------- -------- -------
Revenue for the year totalled GBP124.8m. Revenues from our
semiconductor and Industrial laser markets delivered further strong
growth. Demand for hi-reliability fibre couplers also continued to
grow. These were partly offset by minor reductions in revenues to
our sensing markets, although recent programme wins mean we are
well placed to grow our revenues in this market in the coming
financial year.
Our Life Sciences/Biophotonics business delivered year-on-year
growth of 8.2% (5.3% at constant currency). Our medical diagnostics
business declined slightly as COVID driven demand for our
respirator product declined. This was more than offset by strong
demand for our products used in medical lasers especially for
cosmetic applications.
In A&D significant optical system deliveries on several
armoured vehicle programmes completed in the previous financial
year whilst significant deliveries on our newly won programmes do
not commence until the coming financial years. At the same time our
work with NEC/JAXA on laser-based space communication technologies
completed in 2021 and whilst we are now active in quoting in to new
programmes that will build upon the technology that has now been
proven as a result of that work revenues were not recurring in
FY2022.
Operating Profit
Adjusted operating profit was GBP8.8m compared with GBP13.3m in
the prior year. Gross margins declined by GBP2.3m. As noted above,
the principal drivers of the reduction were the completion of
deliveries in the prior year on a number of armoured vehicles
programmes and the consequent decline in revenues in in A&D in
FY2022. The teams responsible for delivering these programmes which
require significant engineering and contract management resource
are retained in the business and have been instrumental in securing
significant new contract wins in FY2022 that will deliver revenue
in the coming trading periods.
In FY2021 we also completed our final work on the JAXA/NEC space
communications programme. Whilst laser-based space communications
is an important future growth market for G&H and we are
involved in prospecting for future programmes with our retained
engineering teams, revenues in this area declined in the
period.
At the same time the investments we are making in our Precision
Optics centre of excellence in Ilminster are continuing. This
comprises further state of the art equipment enabling the site to
secure more complex optical assembly work from our customers. The
integration of product lines from the Glenrothes and St Asaph sites
in to our Ilminster facility and the consequent extension of lead
times offered to customers mean that the fruits of this investment
have not yet been seen in incremental revenue. However, the output
of the Ilminster site is now increasing and we are confident that
incremental business will follow as our offered lead times
reduce.
The continuing investment in the business was also evident in
our spend on research and development activities. This increased by
GBP1m, or GBP0.7m on a constant currency basis. The majority of
this increase was in our US A&D business where we see good
further growth opportunities. The investment helped in securing a
58% increase in the order book of our Boston business. The Group's
further investment in its productive capacity resulted in an
increase in its total headcount from 869 at September 2021 to 901
at September 2022.
The Group's statutory operating loss was GBP1.6m (2021: profit
GBP5.4m) after a charge for items excluded from adjusted operating
profit of GBP10.4m (2021: GBP7.9m) including GBP1.2m (2021:
GBP5.9m) in respect of the Group's manufacturing footprint
consolidation programme, costs related to the CEO succession of
GBP0.6m, and GBP8.6m in respect of the amortisation and
impairment of intangible assets arising on business acquisitions
(2021: GBP2.1m).
The Group recorded an impairment charge of GBP6.7m on the
carrying value of its goodwill and other acquired intangible assets
held in respect of its UK CGU. This was as a consequence of an
increase in the Group's weighted average cost of capital which has
been driven higher by increased costs of borrowing in the
market.
A reconciliation between adjusted profit and statutory profit is
shown below.
Alternative Performance Measures
Alternative performance measures are presented in these
financial statements as management believe they provide investors
with a means of evaluating the performance of the Group on a
consistent basis. These alternative performance measures exclude
the impact of non-underlying items on the Group's financial
results. The Group's alternative performance measures and their
reconciliation to IFRS measures are shown in the table below.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES
-------------- ----------------- -----------------------------------------------------------------------------------------------
Operating Net finance Profit before Taxation (Losses) Operating
profit costs tax / Earnings cash flow
per share
---------------- ----------------- ----------------- ----------------- ------------------ ---------------- -----------------
Year ended 30 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
September GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence GBP000 GBP000
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Reported (1,557) 5,401 (717) (721) (2,274) 4,680 264 (1,276) (8.0p) 13.6p 6,084 16,822
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Amortisation
of acquired
intangible
assets 1,903 2,081 - - 1,903 2,081 (412) (460) 6.0p 6.5p - -
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Impairment of
goodwill and
intangible
assets 6,726 - - - 6,726 - (288) - 25.7p - - -
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Restructuring
and site
closure 1,179 5,860 - - 1,179 5,860 (235) (1,151) 3.8p 18.8p 526 5,102
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
CEO succession 613 - - - 613 - (87) - 2.0p - - -
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Deferred tax
on goodwill - - - - - - (695) - (2.8p) - - -
---------------- -------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Tax charge
arising
from
restatement
of UK Deferred
tax at 25% - - - - - - 127 519 0.5p 2.1p - -
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Adjusted 8,864 13,342 (717) (721) 8,147 12,621 (1,326) (2,368) 27.2p 41.0p 6,610 21,924
---------------- -------- ------- ------- -------- -------- ------- -------- -------- ------- ------- ------- --------
Net Finance Costs
The net underlying interest expense was GBP0.7m (2021: GBP0.7m)
reflecting similar levels of average borrowing between the two
years.
Tax
The tax credit for the year was GBP0.3m (2021: charge GBP1.3m)
with an underlying tax charge of GBP1.3m (2021: GBP2.4m) after
excluding a credit on non-underlying items of GBP1.6m. This
resulted in an underlying effective tax rate of 16.3% (2021:
18.8%). The reduction in the rate was largely due to the release of
certain provisions held in respect of uncertain items in the prior
year. The rate reflects a combination of the varying tax rates
applicable throughout the countries in which the Group operates,
principally the UK and the USA.
Earnings Per Share
Basic adjusted earnings per share reduced by 33.7% to 27.2p
(2021: 41.0p), reflecting reduced trading volumes in the year.
Basic earnings per share reduced to a loss of (8.0p) (2021: 13.6p).
This reduction was due to the impairment charge recorded against
some of the Group's goodwill balances as well as the reduced
trading volumes.
Cash Generation
Cash flow generated from operating activities was GBP6.1m, down
from GBP16.8m in the prior year. During the year the Group invested
GBP10.0m in additional working capital. This included a further
GBP5.6m of inventory to help protect the Group's production
programmes from the current supply chain tightness and a further
GBP4.4m in the net receivables/payable position reflecting the
higher levels of trading in the final quarter of FY2022 compared to
the same time last year. Cashflows for tangible and intangible
fixed asset additions totalled GBP8.6m (2021: GBP6.2m). The Group
continued to invest in production equipment as well as an upgrade
to its ERP systems and a new Customer Relationship Management
system to help with a more coordinated approach to our engagement
with customers across our global sales team. The payment of
dividends in the year totalled GBP3.1m. The investment in working
capital levels together with the further additions to the Group's
business systems and production equipment meant drawings against
the Group's debt facility increased by $6.4m to $21.3m. The Group
closed the year with net debt of GBP19.1m (2021: GBP9.2m), or
GBP12.8m (2021: GBP2.6m) when lease liabilities are excluded.
Balance Sheet
The Group's total equity at the end of the year was GBP118.5m,
an increase of GBP4.3m over the prior year. This comprised a
decrease of GBP5.1m from retained earnings, a GBP0.7m increase to
reserves in relation to share schemes and a net increase of GBP8.6m
arising from foreign exchange and hedging movements.
During the year, additions to property, plant and equipment
amounted to GBP6.7m (2021: GBP5.4m) and to intangible assets
GBP1.9m (2021: GBP0.8m).
Dividend Policy
The Board has a progressive dividend policy. In determining the
level of dividend the Board considers not only the adjusted
earnings cover, but also looks to the future expected underlying
growth of the business and its capital and other investment
requirements. The Group's balance sheet position and its expected
future cash generation are also considered. The Board also takes in
to consideration the Group's Principal Risks, which are set out in
the Annual Report. The Group's ability to pay a dividend is
impacted by the distributable reserves available in the parent
Company, which operates as a holding company, primarily deriving
its net income from dividends paid by its subsidiary companies. At
30 September 2022, Gooch & Housego PLC had sufficient
distributable reserves to pay dividends for the foreseeable
future.
Given the strength of the Group's order book and the positive
outlook for the forthcoming trading period the Board is proposing a
final dividend of 7.9 pence per share (2021: 7.7p), giving a total
of 12.6 pence per share (FY2021: 12.2p) for the year when combined
with the 4.7 pence per share paid as an interim dividend in July
2022 (FY2021: 4.5p).
Funding and Liquidity
The Group's operations are funded through a combination of
retained profits, equity and borrowings. Borrowings are raised at
Group-level from the Group's banking partner and lent to the
subsidiaries. At 30 September 2022 the Group had available undrawn
committed and uncommitted facilities of $48.7m. The Group's
borrowings are in the form of a US$ denominated Revolving Credit
Facility (RCF). The RCF matures in March 2027.
The Group's leverage is expressed in terms of its net
debt/adjusted EBITDA ratio. Under the Group's credit facility the
figure for net debt used in this ratio excludes IFRS 16 lease
liabilities and other IFRS 16 impacts. The Group's main financial
covenants in its bank facilities states that net debt must be below
2.5 times adjusted EBITDA, and adjusted EBITDA is required to cover
interest charges, excluding interest on pension schemes, by at
least 4.5 times. At 30 September 2022 net debt/adjusted EBITDA was
0.7 times (30 September 2021: 0.1). Interest cover at 30 September
2022 was 24.6 times (30 September 2021: 34.2 times).
The Group maintains sufficient available committed borrowings to
meet any forecast funding requirements.
Financial Risk Management
The Group's main financial risks relate to funding and
liquidity, interest rate fluctuations and currency exposures. The
Group uses financial instruments to manage financial risks arising
from underlying business activities.
Foreign Currency
The Group's policy is to reduce or eliminate, whenever practical
foreign currency transaction risk. The principal currency exposure
is the USD. The Group hedges expected foreign currency cash flows
wherever possible.
The following are the average and closing rates of the foreign
currencies that have the most impact on the translation of the
Group's Income Statement and Balance Sheet into GBP.
2022 2021
Income Statement Average rate
---------------
USD/GBP 1.28 1.37
------- ------
Euro/GBP 1.18 1.15
------- ------
Balance Sheet Closing rate
---------------
USD/GBP 1.12 1.35
------- ------
Euro/GBP 1.14 1.16
------- ------
The Group's revenue is more sensitive to exchange rate movements
than its profit. A one cent change in the average Dollar exchange
rate would have a GBP0.7m effect on revenue but less than GBP0.1m
effect on profit. The Group's results are not significantly
affected by movements in the Euro exchange rate.
Group Income Statement
For the year ended 30 September 2022
30 September 2022 30 September 2021
Note Underlying Non-underlying Total Underlying Non-underlying Total
(Note (Note
4) 4)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2 124,802 - 124,802 124,074 - 124,074
Cost of revenue (85,741) - (85,741) (82,753) - (82,753)
----------- --------------- --------- ----------- --------------- ---------
Gross profit 39,061 - 39,061 41,321 - 41,321
Research and development (9,181) - (9,181) (8,147) - (8,147)
Sales and marketing
expenses (8,697) - (8,697) (8,342) - (8,342)
Administration
expenses (12,879) (3,695) (16,574) (12,294) (7,941) (20,235)
Impairment of goodwill
and acquired intangible
assets - (6,726) (6,726) - - -
Other income 560 - 560 804 - 804
----------- --------------- --------- ----------- --------------- ---------
Operating profit 2 8,864 (10,421) (1,557) 13,342 (7,941) 5,401
Finance income - - - 1 - 1
Finance costs (717) - (717) (722) - (722)
----------- --------------- --------- ----------- --------------- ---------
Profit before
income
tax expense 8,147 (10,421) (2,274) 12,621 (7,941) 4,680
Income tax expense 3 (1,326) 1,590 264 (2,368) 1,092 (1,276)
----------- --------------- --------- ----------- --------------- ---------
Profit / (loss)
for the year 6,821 (8,831) (2,010) 10,253 (6,849) 3,404
----------- --------------- --------- ----------- --------------- ---------
Basic earnings
per share 27.2p (35.2p) (8.0p) 41.0p (27.4p) 13.6p
Diluted earnings
per share 27.0p (35.0p) (8.0p) 40.5p (27.0p) 13.5p
----------- --------------- --------- ----------- --------------- ---------
Group Statement of Comprehensive Income
For the year ended 30 September 2022
2022 2021
Note GBP000 GBP000
-------- --------
(Loss) / profit for the year (2,010) 3,404
Other comprehensive (expense)/income
- items that may be reclassified
subsequently to profit or loss
Losses on cash flow hedges (1,137) (468)
Currency translation differences 9,774 (1,621)
Other comprehensive income / (expense)
for the year net of tax 8,637 (2,089)
Total comprehensive income for
the year attributable to the shareholders
of Gooch & Housego PLC 6,627 1,315
-------- --------
Group Balance Sheet
For the year ended 30 September 2022
2022 2021
GBP000 GBP000
--------- ---------
Non-current assets
Property, plant and equipment 42,447 37,945
Right of use assets 5,063 5,230
Intangible assets 47,939 50,835
Deferred income tax assets 1,969 1,883
--------- ---------
97,418 95,893
Current assets
Inventories 37,073 28,150
Trade and other receivables 35,598 28,310
Cash and cash equivalents 5,999 8,352
78,670 64,812
Current liabilities
Trade and other payables (22,765) (19,324)
Borrowings (64) (65)
Lease liabilities (1,732) (1,588)
Income tax liabilities (578) (481)
(25,139) (21,458)
Net current assets 53,531 43,354
Non-current liabilities
Borrowings (18,730) (10,903)
Lease liabilities (4,539) (5,039)
Provisions for other liabilities
and charges (848) (1,447)
Deferred income tax liabilities (8,291) (7,582)
(32,408) (24,971)
Net assets 118,541 114,276
--------- ---------
Shareholders' equity
Capital and reserves
attributable to equity shareholders
Called up share capital 5,008 5,008
Share premium account 16,000 16,000
Merger reserve 7,262 7,262
Cumulative translation reserve 15,828 6,054
Hedging reserve (1,272) (135)
Retained earnings 75,715 80,087
--------- ---------
Total equity 118,541 114,276
--------- ---------
Group Statement of Changes in Shareholders' Equity
For the year ended 30 September 2022
Called Share Merger Retained Hedging Cumulative Total
up share premium reserve earnings Reserve translation equity
capital account GBP000 GBP000 GBP000 reserve GBP000
GBP000 GBP000 GBP'000
---------- --------- --------- ---------- --------- ------------- --------
At 1 October
2020 5,008 16,000 7,262 77,075 333 7,675 113,353
Profit for the
financial year - - - 3,404 - - 3,404
Other comprehensive
expense for
the year - - - - (468) (1,621) (2,089)
---------- --------- --------- ---------- --------- ------------- --------
Total comprehensive
income / (expense)
for the year - - - 3,404 (468) (1,621) 1,315
---------- --------- --------- ---------- --------- ------------- --------
Dividends - - - (1,127) - - (1,127)
Share-based
payments - - - 735 - - 735
Total contributions
by and
distributions
to owners of
the parent
recognised
directly in
equity - - - (392) - - (392)
At 30 September
2021 5,008 16,000 7,262 80,087 (135) 6,054 114,276
---------- --------- --------- ---------- --------- ------------- --------
At 1 October
2021 5,008 16,000 7,262 80,087 (135) 6,054 114,276
Loss for the
financial year - - - (2,010) - - (2,010)
Other comprehensive
(expense) /
income for the
year - - - - (1,137) 9,774 8,637
---------- --------- --------- ---------- --------- ------------- --------
Total comprehensive
(expense) /
income for the
year - - - (2,010) (1,137) 9,774 6,627
---------- --------- --------- ---------- --------- ------------- --------
Dividends - - - (3,105) - - (3,105)
Share-based
payments - - - 743 - - 743
Total contributions
by and
distributions
to owners of
the parent
recognised
directly in
equity - - - (2,362) - - (2,362)
At 30 September
2022 5,008 16,000 7,262 75,715 (1,272) 15,828 118,541
---------- --------- --------- ---------- --------- ------------- --------
Group Cash Flow Statement
For the year ended 30 September 2022
2022 2021
GBP000 GBP000
-------- ---------
Cash flows from operating activities
Cash generated from operations 6,084 16,822
Income tax repaid / (paid) 456 (575)
-------- ---------
Net cash generated from operating
activities 6,540 16,247
-------- ---------
Cash flows from investing activities
Acquisition of subsidiaries, net
of cash acquired - (3,250)
Purchase of property, plant and
equipment (6,669) (5,399)
Sale of property, plant and equipment - 38
Purchase of intangible assets (1,899) (844)
Interest received - 1
Interest paid (717) (505)
Net cash used in investing activities (9,285) (9,959)
-------- ---------
Cash flows from financing activities
Drawdown of borrowings 6,300 -
Repayment of borrowings (1,312) (14,093)
Principal elements of lease payments (1,584) (2,047)
Dividends paid to ordinary shareholders (3,105) (1,127)
Net cash generated from / (used
by) financing activities 299 (17,267)
-------- ---------
Net decrease in cash (2,446) (10,979)
Cash at beginning of the year 8,352 19,734
Exchange gains / (losses) on cash 93 (403)
-------- ---------
Cash at the end of the year 5,999 8,352
-------- ---------
Notes to the preliminary report
1. Basis of preparation
The Preliminary Report has been prepared under the historical
cost convention and in accordance with International Accounting
Standards.
The Preliminary Report does not constitute statutory financial
statements within the meaning of section 434 of the Companies Act
2006.
Comparative figures in the Preliminary Report for the year ended
30 September 2021 have been taken from the Group's audited
statutory financial statements on which the Group's auditors,
PricewaterhouseCoopers LLP, expressed an unqualified opinion.
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 September 2021,
as described in those financial statements.
2. Segmental analysis
The Company's segmental reporting reflects the information that
management uses within the business. The business is divided into
three market sectors, being Aerospace & Defence, Life Sciences
/ Biophotonics and Industrial, together with the Corporate cost
centre .
The industrial business segment primarily comprises the
industrial laser market for use in the semiconductor and
microelectronic industries, but also includes other industrial
applications such as metrology, telecommunications and scientific
research. Further details can be found on pages 10 to 15.
Aerospace
and Defence Life Sciences/Biophotonics Industrial Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000
For year ended 30
September 2022
------------------------------- ------------- ---------------------------
Revenue
Total revenue 32,992 33,190 69,316 - 135,498
Inter and intra-division (2,439) (3,494) (4,763) - (10,696)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
External revenue 30,553 29,696 64,553 - 124,802
Divisional expenses (31,220) (24,640) (53,437) 107 (109,190)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
EBITDA(1) (667) 5,056 11,116 107 15,612
------------------------------- ------------- --------------------------- ----------- ---------- ----------
EBITDA % (2.2%) 17.0% 17.2% - 12.5%
Depreciation and
amortisation (2,745) (1,378) (3,803) (614) (8,540)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
Operating (loss)
/ profit before amortisation
of acquired intangible
assets (3,412) 3,678 7,313 (507) 7,072
Amortisation and
impairment of acquired
intangible assets - - - (8,629) (8,629)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
Operating (loss)
/ profit (3,412) 3,678 7,313 (9,136) (1,557)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
Operating (loss)
/ profit margin % (11.2%) 12.4% 11.3% - (1.2%)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
Add back non-underlying
items and amortisation
of acquired intangibles 746 273 1,093 8,309 10,421
Adjusted operating
(loss) / profit (2,666) 3,951 8,406 (827) 8,864
------------------------------- ------------- --------------------------- ----------- ---------- ----------
Adjusted (loss) /
profit margin % (8.7%) 13.3% 13.0% - 7.1%
------------------------------- ------------- --------------------------- ----------- ---------- ----------
Finance costs (113) (56) (130) (418) (717)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
(Loss) / profit
before income tax
expense (3,525) 3,622 7,183 (9,554) (2,274)
------------------------------- ------------- --------------------------- ----------- ---------- ----------
2. Segmental analysis (continued)
Aerospace
and Defence Life Sciences/Biophotonics Industrial Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000
For year ended 30
September 2021
-------------------------- ------------- ---------------------------
Revenue
Total revenue 43,619 30,546 59,598 - 133,763
Inter and intra-division (2,530) (3,113) (4,046) - (9,689)
-------------------------- ------------- --------------------------- ----------- ---------- ----------
External revenue 41,089 27,433 55,552 - 124,074
Divisional expenses (37,656) (22,367) (48,180) (84) (108,287)
-------------------------- ------------- --------------------------- ----------- ---------- ----------
EBITDA(1) 3,433 5,066 7,372 (84) 15,787
-------------------------- ------------- --------------------------- ----------- ---------- ----------
EBITDA % 8.4% 18.5% 13.3% - 12.7%
Depreciation and
amortisation (2,877) (1,561) (2,856) (1,011) (8,305)
-------------------------- ------------- --------------------------- ----------- ---------- ----------
Operating profit
before amortisation
of acquired intangible
assets 556 3,505 4,516 (1,095) 7,482
Amortisation of acquired
intangible assets - - - (2,081) (2,081)
-------------------------- ------------- --------------------------- ----------- ---------- ----------
Operating profit 556 3,505 4,516 (3,176) 5,401
-------------------------- ------------- --------------------------- ----------- ---------- ----------
Operating profit
margin % 1.4% 12.8% 8.1% - 4.4%
-------------------------- ------------- --------------------------- ----------- ---------- ----------
Add back non-underlying
items and amortisation
of acquired intangibles 2,581 738 2,541 2,081 7,941
Adjusted operating
profit 3,137 4,243 7,057 (1,095) 13,342
-------------------------- ------------- --------------------------- ----------- ---------- ----------
Adjusted profit margin
% 7.6% 15.5% 12.7% - 10.8%
-------------------------- ------------- --------------------------- ----------- ---------- ----------
Finance costs (144) (36) (152) (389) (721)
-------------------------- ------------- --------------------------- ----------- ---------- ----------
Profit before income
tax expense 412 3,469 4,364 (3,565) 4,680
-------------------------- ------------- --------------------------- ----------- ---------- ----------
(1)EBITDA = Earnings before interest, tax, depreciation and
amortisation
Management have added back the amortisation and impairment of
acquired intangibles and goodwill, restructuring costs, site
closure costs and CEO succession costs in the above analysis. This
has been shown because the Directors consider the analysis to be
more meaningful excluding the impact of these non-underlying
expenses.
All of the amounts recorded are in respect of continuing
operations.
2. Segmental analysis (continued)
Analysis of net assets by location:
2022 2022 2022 2021 2021 2021
Assets Liabilities Net Assets Assets Liabilities Net Assets
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------- ------------ ----------- -------- ------------ -----------
United Kingdom 72,870 (33,909) 38,961 85,163 (28,240) 56,923
USA 101,574 (23,472) 78,102 73,858 (18,006) 55,852
Continental
Europe 488 (52) 436 660 (64) 596
Asia Pacific 1,156 (114) 1,042 1,024 (119) 905
-------- ------------ ----------- -------- ------------ -----------
176,088 (57,547) 118,541 160,705 (46,429) 114,276
-------- ------------ ----------- -------- ------------ -----------
For the year to 30 September 2022 non-current asset additions
were GBP5.5m (2021: GBP4.3m) for the UK and for the USA GBP3.3m
(2021: GBP2.5m). There were no additions to non-current assets in
respect of Europe (2021: GBPnil) or the Asia Pacific region (2021:
GBPnil). The value of non-current assets in the USA was GBP56.4m
(2021: GBP48.1m) and in the United Kingdom GBP41.5m (2021:
GBP47.8m). There were no non-current assets in Europe or the
Asia-Pacific region.
Analysis of revenue by destination:
2022 2021
GBP000 GBP000
-------- --------
United Kingdom 27,848 31,339
North America 47,267 45,915
Continental Europe 26,749 23,383
Asia Pacific and
Other 22,938 23,437
Total revenue 124,802 124,074
-------- --------
3. Income tax expense
Analysis of tax (credit) / charge in the year
2022 2021
GBP000 GBP000
Current taxation
UK Corporation tax 399 722
Overseas tax (3) 292
Adjustments in respect of prior
years (678) (807)
-------- --------
Total current tax (282) 207
-------- --------
Deferred tax
Origination and reversal of temporary
differences (422) 1
Adjustments in respect of prior
years 313 549
Change to UK tax rate 127 519
Total deferred tax 18 1,069
Income tax (income) / expense
per income statement (264) 1,276
-------- --------
4. Non-underlying items
2022 2021
GBP000 GBP000
-------- --------
Included within administration
expenses
Amortisation of acquired intangible
assets 1,903 2,081
Impairment of goodwill and acquired 6,726 -
intangible assets
Restructuring costs 1,179 5,860
Other 613 -
10,421 7,941
-------- --------
Included within taxation
Tax effect of the non-underlying
items above (1,022) (1,611)
Restatement of UK deferred tax
balances at 25% 127 519
Release of deferred tax on goodwill (695) -
-------- --------
(1,590) (1,092)
-------- --------
Restructuring costs incurred in the year ended 30 September 2022
relate to the ongoing streamlining of our manufacturing operations
and outsourcing production of our commodity AO products to a
contract manufacturer in Thailand. The costs incurred in the period
largely comprised staff costs, severance costs, travel costs and
asset write downs at the sites being closed.
Restructuring costs incurred in the year ended 30 September 2021
related to the streamlining of our manufacturing operations and
consequent closure of our Baltimore, Glenrothes and St Asaph
facilities. We are also outsourcing the production of our commodity
AO products to a contract manufacturer in Thailand. The costs
incurred in the period largely comprised staff costs, severance
costs, travel costs and asset write downs at the sites being
closed.
Other non-underlying items relate to costs associated with the
chief executive officer succession and principally included payment
in lieu of notice and accelerated IFRS 2 costs.
The UK corporation tax rate will increase to 25% with effect
from 1 April 2023. Deferred tax balances expected to reverse after
that date were restated at 25% in the year ended 30 September 2021,
giving rise to an income statement charge of GBP0.5m. During the
year ended 30 September 2022, a further charge of GBP0.1m was
incurred in relation to the tax rate differential between current
and deferred tax on timing differences arising in the year.
5. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on
the profit for the year using as a divisor the weighted average
number of Ordinary Shares in issue during the year. The weighted
average number of shares for the year ended 30 September is given
below:
2022 2021
Number of shares used for basic earnings
per share 25,040,919 25,040,919
Number of dilutive shares 211,603 239,603
Number of shares used for dilutive
earnings per share 25,252,522 25,280,522
----------- -----------
A reconciliation of the earnings used in the earnings per share
calculation is set out below:
2022 2021
pence pence
GBP000 per share GBP000 per share
-------- ----------- ------- -----------
Basic (losses) / earnings
per share (2,010) (8.0p) 3,404 13.6p
Amortisation of acquired intangible
assets (net of tax) 1,491 6.0p 1,621 6.5p
Impairment of goodwill and
intangible assets (net of
tax) 6,438 25.7p
Restructuring costs (net of
tax) 944 3.8p 4,709 18.8p
Other non-underlying items
(net of tax) 526 2.0p - -
Release of deferred tax on
goodwill (695) (2.8p) - -
UK deferred tax rate change 127 0.5p 519 2.1p
-------- ----------- ------- -----------
Total adjustments net of income
tax expense 8,831 35.2p 6,849 27.4p
-------- ----------- ------- -----------
Adjusted basic earnings per
share 6,821 27.2p 10,253 41.0p
-------- ----------- ------- -----------
Basic diluted (losses) /
earnings per share (2,010) (8.0p) 3,404 13.5p
-------- ----------- ------- -----------
Adjusted diluted earnings
per share 6,821 27.0p 10,253 40.5p
-------- ----------- ------- -----------
Basic and diluted (losses) / earnings per share before
amortisation and other adjustments has been shown because, in the
opinion of the Directors, it provides a useful measure of the
trading performance of the Group.
6. Dividends
2022 2021
GBP000 GBP000
-------- --------
Final 2021 dividend: 7.7p per share 1,928 -
(Final 2020 dividend paid in 2021:
nil)
2022 Interim dividend of 4.7p per
share (2021: 4.5p per share) 1,177 1,127
-------- --------
3,105 1,127
-------- --------
The Directors have proposed a final dividend of 7.9p per share
making the total dividend paid and proposed in respect of the 2022
financial year 12.6p. (2021: 12.2 p per share).
7. Cash generated from operating activities
Reconciliation of cash generated
from operations
2022 2021
GBP000 GBP000
--------- --------
(Loss) / profit before income
tax (2,274) 4,680
Adjustments for:
- Amortisation of acquired intangible
assets 1,903 2,081
- Amortisation of other intangible
assets 1,438 1,275
- Impairment of intangible assets 6,726
- Loss on disposal of property,
plant and equipment 71 95
- Write back of lease creditor (96) -
on early termination of lease
- Depreciation 7,102 7,030
- Share based payment charge 743 735
- Amounts claimed under the RDEC (200) (280)
- Finance income - (1)
- Finance costs 717 722
--------- --------
Total 18,404 11,657
Changes in working capital
- Inventories (5,557) 1,888
- Trade and other receivables (5,707) (2,655)
- Trade and other payables 1,218 1,252
Total (10,046) 485
Cash generated from operating
activities 6,084 16,822
--------- --------
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