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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Gooch and Housego PLC | AQSE:GHH.GB | Aquis Stock Exchange | Ordinary Share | GB0002259116 | Ordinary Shares 20p |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 550.00 | 400.00 | 600.00 | 556.50 | 485.00 | 550.00 | 200 | 16:29:52 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMGHH
RNS Number : 3565Q
Gooch & Housego PLC
29 November 2016
For immediate release 29 November 2016
Gooch & Housego PLC
("Gooch & Housego", "G&H", the "Company" or the "Group")
PRELIMINARY RESULTS FOR THE YEARED 30 SEPTEMBER 2016
Gooch & Housego PLC (AIM: GHH), the specialist manufacturer of optical components and systems, today announces its preliminary results for the year ended 30 September 2016.
Year ended 30 September 2016 2015 Change ------------------------- ----- ----- -------- Revenue (GBPm) 86.1 78.7 9.3% ------------------------- ----- ----- -------- Adjusted profit before tax (GBPm)* 14.2 12.9 9.7% ------------------------- ----- ----- -------- Adjusted basic earnings per share (pence)* 42.5 39.5 7.6% ------------------------- ----- ----- -------- Statutory profit before tax (GBPm) 10.1 10.1 - ------------------------- ----- ----- -------- Basic earnings per share (pence) 29.1 30.9 (5.8%) ------------------------- ----- ----- -------- Total dividend per share (pence) 9.0 8.2 9.8% ------------------------- ----- ----- -------- Net cash (GBPm) 11.7 17.3 (32.4%) ------------------------- ----- ----- --------
* adjusted figures exclude the amortisation of acquired intangible assets, gain on bargain purchase, impairment of goodwill and exceptional items being restructuring, provision for export compliance and transaction costs.
Operating & Strategic Highlights
-- Excellent performance from our fibre based business, in particular telecoms, satellite communications and fibre sensing
-- Strong second half performance with good momentum going into FY17 -- Two highly complementary acquisitions completed in the Aerospace & Defence sector -- Substantially upgraded a number of our real estate assets -- Ongoing performance improvement initiatives driving efficiencies -- Investment in R&D up 15.4%, 21 new products introduced and 5 new patents granted
Financial Highlights
-- Revenue for the year GBP86.1m, 9.3% higher than 2015. Acquisitions contributed GBP2.4m in the year.
-- Adjusted profit before tax up 9.7%
-- Strong cash performance delivering net cash of GBP11.7m at year end, after investing GBP5.7m in acquisitions and GBP9.7m in property, plant & equipment (2015: GBP17.3m).
-- Record year end order book of GBP52.8m, up 45% from 30 September 2015 -- Proposed final dividend of 5.7p. Full year dividend growth of 9.8%.
Mark Webster, Chief Executive Officer, commented
"During FY 2016 G&H made good progress with its strategic goals of further diversification and moving up the value chain; we met our financial objectives; made a number of strategically important investments and have acquired two highly complementary companies.
These strategic initiatives combined with a record year end order book mean we are well placed for future material growth"
For further information please contact:
Gooch & Housego Mark Webster / PLC Andrew Boteler 01460 256 440 Investec Bank Patrick Robb / plc (Nomad & Broker) David Anderson 020 7597 5970 Mark Court / Sophie Buchanan Cowles 020 7466 5000
Expected Financial Calendar
Annual General Meeting 22 February 2017 Payment date for final dividend 3 March 2017 for the year ended 30 September 2016 to shareholders on the register at close of business 16 December 2016. Subject to approval by shareholders June 2017 at the Annual General Meeting 30 September 2017 Interim Results announcement December 2017 Financial Year End Preliminary announcement of results for the year ended 30 September 2017
Chairman's Statement
I am pleased to report that your company has performed well in 2016 and has continued to make good progress in delivering on its strategic objectives. The year was characterised by mixed trading conditions. After a slow start, activity increased as the year progressed and was particularly strong in the second half, following a trend that has continued into the start of the new financial year. This trading pattern presented considerable challenges in terms of manufacturing capacity planning towards the end of the period, but investments in additional skills and a programme of internal efficiency improvements across the organisation ensured that these challenges were successfully met. Other notable achievements include the completion of two acquisitions and the relocation of one of our largest manufacturing facilities.
Headline revenues increased 9.3% year on year, with approximately 55% of total sales in the second half. Your company has continued to deliver profitable growth with adjusted profit before tax increasing by 9.7%. The business remains in a strong net cash position at GBP11.7 million (2015 : GBP17.3 million) despite making two acquisitions in the year and making material investments in capital assets to drive the business forward.
We have started the current financial year with a favourable trading environment. This is driven by the order book for our fibre based business, in particular high reliability undersea fibre couplers, fibre based satellite communications, fibre sensing and critical components used in microelectronic manufacturing. At the year end the order book stood at GBP52.8 million, an increase of 45% compared with the same time last year.
In July 2016 your company completed two acquisitions in the Aerospace & Defence sector; one in the UK and the other in the US. These acquisitions continue to further our strategic objectives of broadening our product offerings and diversifying our markets, both geographically and by sector. Kent Periscopes Ltd designs, develops and manufactures periscopes and sighting systems for Armoured Fighting Vehicles ("AFVs"). Alfalight specialises in diode and diode-pumped lasers for the US defence sector.
Significant progress was made in the year in relocating and upgrading a number of our real estate assets. The relocation of our Palo Alto operations to nearby Fremont was a major undertaking but it has provided much improved facilities and room for growth at a similar ongoing cost. We have continued to upgrade and expand our Torquay facility, allowing us to manage the considerable increases in demand we have seen in this site over the past two years. 2016 also saw the commencement of the refurbishment of our Cleveland facility, which will help drive much needed operational efficiency as well as showcasing the site's unique world leading crystal growth capabilities to customers.
Having spent eight years as a non-executive Director, Paul Heal has decided not to stand for re-election at the AGM in February 2017. Paul has played an integral role in the development of Gooch & Housego as a business over those years and I would like to record my thanks to Paul for his support and guidance, which have been invaluable. We have begun a process to identify a replacement for Paul.
In summary, 2016 has been a busy and successful year for Gooch & Housego. We have acquired two businesses, continued our drive for operational excellence, relocated one of our largest facilities and materially expanded another. All of this has been achieved against a backdrop of challenging, if ultimately favourable, trading conditions. As we enter 2017, the strength of the US Dollar against the British Pound will benefit the business in the short term, but there remains uncertainty in world markets. With a strong balance sheet, good cash flow, excellent order book and enhanced facilities, processes and systems, the Company is well positioned to exploit exciting growth opportunities in photonics. I would like to thank my fellow directors and employees of Gooch & Housego for making 2016 another successful year for the Company.
Gareth Jones
Chairman
Chief Executive Officer's Statement
Overview
Gooch and Housego (G&H) has made good progress towards achieving its twin strategic goals of further diversification and moving up the value chain. We have continued to focus on driving a higher level of organic growth from our portfolio of world leading products and technologies, invested in a number of strategically important areas and have acquired two highly complementary companies during FY 2016.
G&H's FY 2016 financial expectations were met, with revenue and adjusted profit growth of 9.3% and 9.7% respectively. This was achieved despite challenging first quarter market conditions in our industrial laser business and is testament to the resilience of the business and our active policy of diversification designed to offset the impact of the economic cycle on some of our core markets.
In addition to pursuing further diversification we want to build a company that moves up the value chain by selling sub-systems and systems wherever possible. The Systems Technology Group ("STG"), based at our Torquay site, is dedicated to helping G&H achieve this and now has over 30 engineers and scientists. They bring a wide range of skills such as electronic, software and mechanical engineering, which are necessary if we are to present a complete sub-system or system to our customers.
The most notable success of the STG during FY 2016 has been the growth of the strategically important space satellite communications business. Funding has been secured from the European Space Agency, UK Space Agency and other sources to pursue leading edge research and we have won our first commercial contract for the development of critical subsystems used in inter satellite communications.
Our performance improvement plan has made further progress during the course of the year. The aim is to develop a more unified business where the skills, expertise and technologies across our nine sites are better leveraged throughout G&H and our customers are presented with a more complete and professional offering.
G&H's operations group has now established small globally focused teams representing each of the key manufacturing disciplines. They hold each site to the same high standards and have made a good start on introducing lean manufacturing principles. The recently introduced A&D business development executives have brought enhanced access to tier 1 companies and helped develop new A&D focused R&D projects. In FY 2016 we hired our first Life Science business development executive in the USA and intend to achieve similar positive results in this sector. A more targeted approach has been taken towards R&D, with better funded projects and this has resulted in a record 21 new products in FY 2016.
The Industrial sector represents 63% of G&H's revenue and has provided most of the growth during FY 2016. A&D and Life Sciences give a better balance to our business, provide significant opportunities for our technologies and have greater potential than Industrials for moving up the value chain. It is our intention to grow A&D and Life Sciences to levels where we can, over time, establish a similar critical mass to our Industrial sector. This will be achieved through a mix of investment in R&D and acquisitions.
To this end, we acquired two A&D businesses during 2016:
-- Kent Periscopes Ltd (Kent) is a UK based supplier of periscopes, vehicle sights and related equipment for land based armoured vehicles. Its proven capability in system level optical products in harsh environments and impressive 'blue chip' customer list make it a great fit. Kent will benefit from G&H's greater global reach and complementary technologies.
-- The trade and assets of Alfalight Inc, a designer and manufacturer of high reliability, laser based, electro-optic systems for defence and security applications, based in Madison, Wisconsin. It is highly complementary to our existing Boston, Massachusetts, site and will be incorporated into this business unit.
The completion of substantial infrastructure investment in our Torquay site has enabled us to meet the challenge of the exceptional year on year growth of our high reliability fibre couplers for undersea cables. Our Palo Alto facility has now completed its move across the San Francisco Bay to a purpose- built facility in Fremont, with plenty of room for further growth for its core business, based on fibre lasers and 40G / 100G modulation systems for land based telecommunications. The Cleveland site which houses our strategically important crystal growth facility will complete its upgrade project during FY 2017.
G&H is in a strong position financially and is well positioned to make further investment in the business.
Markets and Applications - Industrial
The Industrial sector represents 63% of G&H's revenue and is composed of a diverse range of industrial applications aligned to our world class photonic technologies, including microelectronic manufacturing, semiconductor manufacturing and test, remote sensing, metrology and telecommunications.
Our Industrials division grew by GBP8.2 million or 17.9% compared to previous year and this is reflective of a number of positive market trends in this sector. This growth was achieved despite the challenging market conditions for microelectronic manufacturing in China and the far east, which saw a slow down in the first quarter. The industrial laser market did pick up markedly for the rest of the year and when combined with record orders for our fibre based business it led to a higher second half weighting than last year and a strong overall performance.
There is a general trend towards fibre optic solutions across a range of applications and this is especially so for lasers used in materials processing applications. Fibre lasers are gaining share from solid state lasers and at the same time increasing the number of applications where lasers have utility; this is due to fibre lasers often providing improved reliability and flexibility at a lower cost.
G&H is a world leader in acousto-optic products for industrial lasers and is well positioned to take advantage of this trend. Fibre laser components now represent a higher proportion of our business than the traditional conduction cooled or water cooled "Q-switches" for solid state lasers. The ground breaking Fibre-Q used for a range of laser modulation applications was the recipient of a prestigious Queen's Award for Enterprise in the Innovation category this year. We remain committed to further investment in new products and cost reduction initiatives in this area to enable us to retain our market leading position.
This year saw the first contract for our precision measurement system used on smart phone/ tablet production lines and is an area of good future potential.
The semiconductor manufacture and test market showed strong growth during FY 2016. Laser technology is essential to enhance miniaturisation and speed in this fast moving sector, which means that we see this as a good growth driver for G&H over the medium term.
Remote sensing took a step forward this year with a hard-earned security and surveillance contract for an oil pipeline.
The need for ever more data capacity from government, industry and the consumer has driven an especially strong telecommunications performance. G&H provides the more technically challenging elements to both land based and undersea telecommunications systems. There has been a significant 'uptick' in demand for our ultra high reliability fibre couplers which are used in amplifiers on the sea bed in the undersea cable network. This growth is driven by 'non- traditional' investors in these undersea networks from 'Silicon Valley' that want to control their own traffic.
Markets and Applications - Aerospace & Defence
A&D represented 23% of our revenue in FY 2016 and was flat on the previous year. This reflects a sector that for G&H's range of technological capabilities is a target rich environment, but a business that has not yet reached a critical mass. The two recent A&D acquisitions coupled with the investment in new areas of growth such as SWIR lenses, for low light environments and our developing position in space satellite communications are key 'steps on the way' to achieving this.
Product quality, reliability and performance are essential success criteria in the A&D arena and that plays to G&H's strengths. We have well established positions in target designation, range finding, ring laser and fibre optic gyroscope navigational systems, infra red and RF countermeasures and have recently added SWIR lenses, for low light environments and space photonics. The customers for our products encompass the major A&D companies in both Europe and the USA.
Our fibre optic and infrared capabilities very much reflect the 'direction of travel' for this sector as our A&D customers upgrade their products to lighter, more durable and reliable technologies. Many of our customers in this sector prefer to buy sub- systems and integrate them into their systems and though the quality barriers to this are challenging we have succeeded with some high profile companies in selling sub systems' rather than just high quality critical components and are actively trying to move more customers up the value chain.
Space satellite communication is entering into a new period of development based on lighter, more efficient and robust fibre optic technology and G&H is at the leading edge of this revolution.
Markets and Applications - Life Sciences
Life Sciences represents 9% of G&H's revenue and after a strong year last year sales were down. As with A&D we see good potential for our technologies in this sector, a greater ability to move up the value chain than with Industrials, but a business that has not yet reached critical mass. It is therefore susceptible to the ordering patterns of one or two customers. The desired "future state" will be achieved through a combination of investment in R&D and acquisitions.
The principal applications are in optical coherence tomography (OCT), laser surgery and microscopy. OCT is widely used in ophthalmology and G&H has developed a strong position with the main participants in this market. The potential for this technology to be used in other areas of medical diagnostics is high and we have a number of programmes with medical diagnostic companies designed to exploit these opportunities.
Laser surgery is a fast growing area particularly in ophthalmology, prostate and aesthetic treatments and has the potential to be exploited beyond these current areas of high use.
G&H has established a sub-system presence with a number of our customers and our aim is to extend this during FY 2017.
Markets and Applications - Scientific Research
G&H's scientific research market is dominated by a small number of 'big science' projects in the fields of nuclear fusion research and synchrotron radiation sources. It provides 5% of our revenue and revenue is flat year-on-year. This is a prestigious and profitable sector for G&H where we have some unique capabilities and over time this is an area that should provide steady growth, and we will continue to selectively invest in this area.
Outlook
During FY 2016 G&H made good progress with its strategic goals of further diversification and moving up the value chain; we met our financial objectives; made a number of strategically important investments and have acquired two highly complementary companies.
We are committed to make further R&D investment in our targeted high growth areas. These include fibre optic lasers, fibre optic sensing, precision inspection equipment for microelectronic manufacturing, laser surgery, A&D sub systems, OCT medical diagnostics and space satellite communications.
G&H intends to build on the good progress made with our performance improvement programme by: further improving operational efficiency, with particular reference to the introduction of lean manufacturing across all our sites; continuing to invest in A&D business development, establishing similar business development activity in Life Sciences and focussing our resources on fewer, but higher return R&D projects.
We will continue with an active policy of making further progress towards a more diverse and balanced business by building critical mass in A&D and Life Sciences through a mix of R&D investment and acquisitions.
These strategic initiatives combined with a record year end order book mean the Board remains confident that Gooch and Housego is well positioned to deliver further progress in FY 2017 and beyond.
Mark Webster
Chief Executive Officer
Performance Overview
The business has once again delivered strong profitable growth.
Group revenue for the year was a record GBP86.1 million. This represents an increase of GBP7.3 million, or 9% over the previous year of GBP78.7 million. During the year Gooch & Housego acquired two businesses, which contributed a combined GBP2.4 million to group revenue and GBP0.3m in profit before tax in the year. On a constant currency basis revenue was 3% higher than the previous year.
During 2016, Gooch & Housego invested GBP9.7 million in property, plant and equipment and GBP5.7 million in acquisitions. Despite this the business has maintained a net cash position of GBP11.7 million at 30 September 2016 (2015: GBP17.3 million), through strong operating cash flows.
In the financial year under review, adjusted operating margins were 16.6%, compared to 16.6% in 2015. Margin was influenced by a number of factors during the year. Whilst there were price pressures in our navigation and fibre laser components businesses, this was counteracted by the business benefiting from volume driven margin increases in our Torquay fibre based and Orlando instrumentation businesses.
REVENUE ------------------------------- ----- -------- ------- 2016 2015 --------------- ----------------- Year ended 30 GBP'000 % GBP'000 % September --------------------- -------- ----- -------- ----- Industrial 54,296 63% 46,054 59% --------------------- -------- ----- -------- ----- Aerospace & Defence (A&D) 19,977 23% 19,804 25% --------------------- -------- ----- -------- ----- Life Sciences 7,904 9% 8,978 11% --------------------- -------- ----- -------- ----- Scientific Research 3,874 5% 3,866 5% --------------------- -------- ----- -------- ----- Group Revenue 86,051 100% 78,702 100% --------------------- -------- ----- -------- -----
In our Industrial segment, revenue grew by 18% from GBP46.1 million last year to GBP54.3 million this year. Revenue in our Aerospace & Defence business was broadly flat, and our Life Sciences business fell from GBP9.0 million to GBP7.9 million. Sales into our smallest segment, Scientific Research, remained stable at GBP3.9 million.
GROUP EARNINGS PERFORMANCE ------------------------------ -------- -------- ---------- All amounts in Adjusted Reported GBP'000 -------------------- Year ended 30 2016 2015 2016 2015 September -------------------- -------- -------- -------- -------- Operating profit 14,258 13,102 10,184 10,294 -------------------- -------- -------- -------- -------- Net finance costs (88) (188) (88) (188) -------------------- -------- -------- -------- -------- Profit before taxation 14,170 12,914 10,096 10,106 -------------------- -------- -------- -------- -------- Taxation (3,865) (3,380) (3,048) (2,647) -------------------- -------- -------- -------- -------- Profit for the year 10,305 9,534 7,048 7,459 Basic earnings per share (p) 42.5p 39.5p 29.1p 30.9p -------------------- -------- -------- -------- --------
The Group adjusted profit before tax amounted to GBP14.2 million (2015: GBP12.9 million) and represented a net margin of 16.5% which is broadly consistent with the previous year. Statutory profit before tax was GBP10.1 million compared with GBP10.1 million last year, including the one-off costs associated with the Palo Alto facility move, restructuring costs, provision for regulatory risk compliance and acquisition costs.
The adjusted effective rate of tax was 27.3% (2015: 26.2%). The effective rate of tax of 30.2% (2015: 26.2%) was higher due to the inclusion of the Research and Development Expenditure Credit ("RDEC") within operating profit for the year and the effect of the impairment of goodwill and gain on bargain purchase, neither of which are subject to tax. 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.
The effective rate of tax should benefit in the future from further reductions in the UK tax rate, although the proportion of profit generated in the USA, where tax rates are higher, will affect this.
Adjusted earnings per share (EPS) increased from 39.5p to 42.5p. Basic EPS was 29.1p compared with 30.9p last year.
RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES Operating Net finance Taxation Earnings Profit costs per share ----------------- ------------------ ------------------ ------------------ ---------------- Year ended 2016 2015 2016 2015 2016 2015 2016 2015 30 September GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Reported 10,184 10,294 (88) (188) (3,048) (2,647) 29.1p 30.9p ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Amortisation of acquired intangible assets 1,263 1,604 - - (333) (419) 3.8p 4.9p ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Gain on bargain purchase (578) - - - - - (2.4p) - ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Impairment of goodwill 771 - - - - - 3.2p - ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Provision for regulatory compliance risk 500 - - - - - 2.1p - ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Restructuring costs 1,652 1,204 - - (391) (314) 5.2p 3.7p ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Transaction fees 466 - - - (93) - 1.5p - ----------------- -------- -------- -------- -------- -------- -------- ------- ------- Adjusted 14,258 13,102 (88) (188) (3,865) (3,380) 42.5p 39.5p ----------------- -------- -------- -------- -------- -------- -------- ------- -------
NON GAAP MEASURES
The Company uses a number of non GAAP measures which are shown in the table above and in the segmental analysis. These measures are used to illustrate the impact of non-recurring and non-trading items on the Company's financial results. These are the impact of the amortisation of acquired intangible assets and costs associated with restructuring activities, the provision for regulatory risk compliance and also include the gain on bargain purchase of Alfalight and impairment of goodwill in 2016. The Company also uses the term EBITDA (Earnings before interest, taxation, depreciation and amortisation), which is a commonly used measure of operating performance and cash flow.
SEGMENTAL ANALYSIS
Industrial
Our Industrial business grew strongly during the year, with revenues of GBP54.3 million, compared with GBP46.1 million last year. This growth was largely driven by a combination of our sensing, instrumentation and telecommunications businesses. Revenue from the Group's industrial laser business segment, after a poor first quarter, showed an increase compared with the previous year. The traditional Q Switch now represents 10.0% of total group revenue (2015: 9.9%).
After adjusting for the costs associated with the Palo Alto facility move and restructuring, operating profit for the Industrial sector as a whole was 12% higher at GBP10.8 million, compared with GBP9.6 million last year. This primarily reflects a combination of the growth in our Torquay fibre business and our instrumentation business.
Aerospace & Defence (A&D)
A&D revenue was GBP20.0 million, broadly flat on last year, although this is being flattered by the acquisitions which contributed revenue of GBP2.4m in this sector. The business provides both components and sub-systems to the Company's European and US A&D customers. We continue to believe this business represents a growth opportunity for Gooch & Housego, as optical technologies continue to be increasingly deployed in this market sector. This sector has been significantly strengthened this year with the acquisitions in July of Kent Periscopes and Alfalight. Operating margins in this sector fell as a result of the timing of some programme business and tighter margins on our navigation components business.
Life Sciences
In 2016 Life Sciences revenue was down by 12% compared to the prior year. Sales of electro-optic products into the laser surgery market remained strong, but this was offset by a decline in sales into Optical Coherence Tomography due to customers' product lifecycles becoming more mature. Despite this, adjusted operating profit in this sector was in line with the previous year due to a more beneficial mix. We are working on the next generation products with key customers and continue to believe this market offers a significant growth opportunity.
Scientific Research
Our activities in the Scientific Research market are dominated by a small number of large, long-term programmes.
This market was stable in 2016 and this resulted in a consistent financial performance when compared to the previous year.
RESEARCH & DEVELOPMENT (R&D)
Gooch & Housego continues to invest in R&D in all areas of the business and regards this as fundamental to the continued growth of the company. There were a record 21 product releases in 2016, together with five new patents granted.
Expenditure on R&D in the year to 30 September 2016 increased by 15.4% from GBP6.4 million to GBP7.4 million. A proportion of this increase was funded through UK and European grant funding. R&D expenditure represented 8.6% of revenue (2015: 8.0%). The Group capitalised GBP0.7m (2015: GBP0.7 million) of development expenditure.
SITE PERFORMANCE
In 2015 G&H took the decision to re-locate its Palo Alto facility to nearby Fremont. This decision was based on a landlord change which threatened the long term viability of Palo Alto as a location. This move is now complete and has provided a much improved facility and room for growth at a similar rent. The move itself took longer than expected due to regulatory licence and landlord contractual issues. The delay contributed an additional GBP0.9 million in costs in the first six months of 2016.
The Torquay site has recently been expanded and upgraded allowing us to manage the capacity challenges that come with a 2.5 fold increase in demand for Hi-Reliability undersea fibre couplers. Further investment in capacity at this site will continue throughout 2017.
Our continuous improvement programme is proceeding well. Operationally the move to a lean manufacturing environment across all of our sites is set to deliver efficiency savings in 2017 and the drive for fewer more productive R&D projects combined with enhanced business development support has started to deliver an increased number of product opportunities.
As reported last year, the Company has committed to upgrading its Cleveland, Ohio facility. This facility, which houses the business's world leading crystal growth capabilities, is a key contributor to current and future profitability and will benefit from the proposed modernisation. The refurbished facility will help drive much needed operational efficiency as well as showcasing our capabilities to customers. The upgrade is expected to be a two-year programme costing in the region of $5 million.
NON TRADING ITEMS
Restructuring costs of GBP1.7 million (2015: GBP1.2 million) related to the re-location of our Palo Alto facility to Fremont and to restructuring costs arising from the efficiency savings the business was able to derive from its operational efficiency measures.
Management have booked a provision for export compliance risk of GBP0.5m in the year.
BALANCE SHEET
The Group's total equity at the end of the year was GBP90.2 million, an increase of GBP11.8 million over the prior year. This increase comprised GBP6.0 million due to foreign exchange and GBP5.8 million from retained earnings.
Additions to property, plant and equipment totalled GBP8.4m (excluding acquisitions). The main additions related to investment in plant and machinery, the expansion of our Torquay facility, the refurbishment of our Cleveland facility and the Palo Alto facility move.
Working capital was 24.5% of revenue in the current year compared to 20.3% in 2015. This metric has been adversely affected by the acquisitions in July and the impact of the GBP:USD exchange rate on balance sheet values.
Inventory at the year end was GBP19.0 million, an increase of GBP3.0 million over the prior year. Once the impact of currency and the inventory attributable to the acquisitions are removed, the underlying inventory fell by GBP0.5m, or 3%, in the year.
Trade receivables have increased by GBP8.8 million from GBP11.7 million in 2015 to GBP20.5 million at this year-end. This is a function of a strong shipment profile towards the end of the year, the acquisitions and the impact of foreign exchange rates.
Cash balances at 30 September 2016 were GBP23.2 million, compared with GBP22.6 million at 30 September 2015. Net cash flows from operating activities generated GBP12.6 million, compared with GBP13.6 million last year. During the year the business moved from a net cash position of GBP17.3 million as at 30 September 2015 to a net cash position of GBP11.7 million, following the acquisition of Alfalight & Kent Periscopes and the GBP9.7 million invested in property, plant and equipment.
MOVEMENT IN NET CASH
All amounts in GBPm Gross Gross Net Cash Debt Cash ----------------------------- ------- ------- ------- At 1 October 2015 22.6 (5.3) 17.3 Operating cash flows 15.7 - 15.7 Debt repayment (net of drawdown) 5.4 (5.4) - Acquisitions (5.7) - (5.7) Net capital expenditure (10.3) - (10.3) Working capital (1.8) - (1.8) Interest, tax and dividends (3.5) - (3.5) Exchange movement 0.8 (0.8) - ----------------------------- ------- ------- ------- At 30 September 2016 23.2 (11.5) 11.7 ----------------------------- ------- ------- -------
ORDER BOOK
As at 30 September 2016, the Group order book stood at GBP52.8 million, compared to GBP36.3 million at the end of the 2015 financial year, a 45% increase. The acquisition of Alfalight and Kent Periscopes added GBP11.4 million to the order book. On a constant currency basis the order book was 36% higher. Book to bill ratios for the business as a whole were 1.01 times (six month rolling average) as at 30 September 2016.
STAFF
The Group workforce increased from 700 at 30 September 2015 to 755 at the end of September 2016, an increase of 55. This is a net position and therefore reflects both the reductions in staffing resulting from the work the business has done in driving efficiency improvements and the additional headcount that has come from the recent acquisitions.
DIVIDS
The Directors propose a final dividend of 5.7p per share making a total dividend per share for the year of 9.0p (2015: 8.2p), an increase of 9.8%. The final dividend, if approved, will be payable on 3 March 2017 to shareholders on the Company's share register as at the close of business on 16 December 2016.
KEY PERFORMANCE INDICATORS (KPIs)
The Group objective is to deliver sustainable, long-term growth in revenue and profits. This is to be achieved through the execution of the Board's strategies.
In striving to achieve these strategic objectives, the main financial performance measures monitored by the Board are:
Total revenue growth 2016 2015 2014 ---------------------- ----- ----- ----- At actual exchange rates 9% 12% 11% ---------------------- ----- ----- ----- At constant exchange rates 3% 8% 16% ---------------------- ----- ----- -----
The Board is focused on driving revenue growth by investing both organically and through acquisitions. The Group business has delivered underlying growth which was particularly strong in the second half of the year.
Target market revenue 2016 2015 2014 ----------------------- ----- ----- ----- Aerospace & Defence (GBPm) 20.0 19.8 18.8 ----------------------- ----- ----- ----- Life Sciences (GBPm) 7.9 9.0 7.3 ----------------------- ----- ----- -----
The Group target markets of Aerospace & Defence and Life Sciences provide a route to sustainable growth, and a more diversified revenue base. These markets also provide significant opportunities for Gooch & Housego to migrate up the value-chain from materials and components to higher value sub-assemblies, modules and systems in response to the trend for our larger customers to outsource increasingly complex parts of their business. The decline in revenue from Life Sciences was driven by lower demand from one area of our Life Sciences markets.
Net cash analysis 2016 2015 2014 ------------------- ------------ ----- ----- Net cash (GBPm) 11.7 17.3 8.7 ------------------- ------------ ----- -----
In order to balance business risk with the investment needs of the Company, management closely monitors and manages net cash. This year, following the acquisition of Alfalight and Kent Periscopes and the investment in capital assets the net cash position reduced from GBP17.3 million to GBP11.7 million.
Earnings per share 2016 2015 2014 (EPS) ---------------------- ------ ------ ------ Adjusted diluted EPS (pence) 41.7p 38.9p 35.2p ---------------------- ------ ------ ------
As a result of a strong trading performance, the business has been able to deliver growth in adjusted diluted EPS of 7.2%, from 38.9p to 41.7p in 2016.
The revenue, cash and earnings per share targets for the year were met.
Group Income Statement
For the year ended 30 September 2016 (unaudited)
2016 2015 Note GBP000 GBP000 --------- --------- Revenue 2 86,051 78,702 Cost of revenue (53,752) (47,659) --------- --------- Gross profit 32,299 31,043 Research and Development (6,697) (5,712) Sales and Marketing (6,469) (5,626) Administration (11,425) (10,353) Other income and expenses 2,476 942 --------- --------- Operating profit 2 10,184 10,294 Finance income 39 26 Finance costs (127) (214) --------- --------- Profit before income tax expense 10,096 10,106 Income tax expense 3 (3,048) (2,647) --------- --------- Profit for the year 7,048 7,459 --------- --------- Basic earnings per share 4 29.1p 30.9p Diluted earnings per share 4 28.6p 30.4p --------- ---------
Reconciliation of operating profit to adjusted operating profit:
2016 2015 GBP000 GBP000 ------- ------- Operating profit 10,184 10,294 Amortisation of acquired intangible assets 1,263 1,604 Gain on bargain purchase (578) - Impairment of goodwill 771 - Provision for regulatory 500 - compliance risk Restructuring costs 1,652 1,204 Transaction fees 466 - Adjusted operating profit 14,258 13,102 ------- -------
Group Balance Sheet
For the year ended 30 September 2016 (unaudited)
2016 2015 GBP000 GBP000 --------- --------- Non-current assets Property, plant and equipment 32,384 24,915 Intangible assets 29,916 20,155 Deferred income tax assets 2,674 2,552 --------- --------- 64,974 47,622 Current assets Inventories 18,973 16,013 Income tax assets 394 854 Trade and other receivables 22,679 14,394 Cash and cash equivalents 23,167 22,556 65,213 53,817 Current liabilities Trade and other payables (19,624) (14,059) Borrowings (4) (39) Income tax liabilities (891) (411) Provision for other liabilities and charges (940) (342) --------- --------- (21,459) (14,851) Net current assets 43,754 38,966 Non-current liabilities Borrowings (11,494) (5,189) Deferred income tax liabilities (4,806) (3,032) Deferred consideration (2,256) - (18,556) (8,221) Net assets 90,172 78,367 --------- --------- Shareholders' equity Called up share capital 4,852 4,818 Share premium account 15,530 15,530 Merger reserve 2,671 2,671 Cumulative translation reserve 6,984 1,030 Retained earnings 60,135 54,318 --------- --------- Total equity 90,172 78,367 --------- ---------
Group Statement of Changes in Shareholders' Equity
For the year ended 30 September 2016 (unaudited)
Called Share up premium Merger Hedging Retained Total share account reserve reserve earnings equity Note capital GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 --------- --------- --------- ---------- ----------- --------- At 1 October 2014 4,774 15,420 2,671 (21) 47,093 69,937 Profit for the financial year - - - - 7,459 7,459 Other comprehensive income for the year - - - 21 1,800 1,821 --------- --------- --------- ---------- ----------- --------- Total comprehensive income for the year - - - 21 9,259 9,280 --------- --------- --------- ---------- ----------- --------- Dividends 5 - - - - (1,823) (1,823) Shares issued 44 110 - - (38) 116 Fair value of employee services - - - - 485 485 Tax credit relating to share option schemes - - - - 372 372 Total contributions by and distributions to owners of the parent recognised directly in equity 44 110 - - (1,004) (850) At 30 September 2015 4,818 15,530 2,671 - 55,348 78,367 At 1 October 2015 4,818 15,530 2,671 - 55,348 78,367 Profit for the financial year - - - - 7,048 7,048 Other comprehensive income for the year - - - - 5,954 5,954 --------- --------- --------- ---------- ----------- --------- Total comprehensive income for the year - - - - 13,002 13,002 --------- --------- --------- ---------- ----------- --------- Dividends 5 - - - - (2,055) (2,055) Shares issued 34 - - - (34) - Fair value of employee services - - - - 638 638 Tax credit relating to share option schemes - - - - 220 220 Total contributions by and distributions to owners of the parent recognised directly in equity 34 - - - (1,231) (1,197) At 30 September 2016 4,852 15,530 2,671 - 67,119 90,172 --------- --------- --------- ---------- ----------- ---------
Group Statement of Comprehensive Income
For the year ended 30 September 2016 (unaudited)
2016 2015 GBP000 GBP000 ------- ------- Profit for the year 7,048 7,459 Other comprehensive income - items that may be reclassified subsequently to profit or loss Fair value adjustment of interest rate swap net of tax - 21 Currency translation differences 5,954 1,800 Other comprehensive income for the year net of tax 5,954 1,821 Total comprehensive income for the year attributable to the shareholders of Gooch & Housego PLC 13,002 9,280 ------- -------
Group Cash Flow Statement
For the year ended 30 September 2016 (unaudited)
Note 2016 2015 GBP000 GBP000 --------- -------- Cash flows from operating activities Cash generated from operations 6 13,897 14,692 Income tax paid (1,324) (1,067) --------- -------- Net cash generated from operating activities 12,573 13,625 --------- -------- Cash flows from investing activities Acquisition of subsidiaries, (5,687) - net of cash acquired Purchase of property, plant and equipment (9,710) (3,053) Sale of property, plant and equipment - 635 Purchase of intangible assets (629) (793) Interest received 39 26 Interest paid (111) (189) --------- -------- Net cash used in investing activities (16,098) (3,374) --------- -------- Cash flows from financing activities Drawdown of borrowings 5,426 5,168 Repayment of borrowings (39) (8,777) Proceeds from issues of share capital - 115 Dividends paid to ordinary shareholders (2,055) (1,823) Net cash generated from / (used in) financing activities 3,332 (5,317) --------- -------- Net (decrease) / increase in cash (193) 4,934 Cash at beginning of the year 22,556 17,094 Exchange gains on cash 804 528 --------- -------- Cash at the end of the year 23,167 22,556 --------- --------
Analysis of net cash
At 1 Exchange Non cash At 30 Oct 2015 Cash movement movement Sep flow 2016 GBP000 GBP000 GBP000 GBP000 GBP000 ---------- -------- ---------- ---------- --------- Cash at bank and in hand 22,556 (193) 804 - 23,167 Debt due after 1 year (5,189) (5,426) (859) - (11,474) Finance leases (39) 39 - (25) (25) ---------- -------- ---------- ---------- --------- Net cash 17,328 (5,580) (55) (25) 11,668 ---------- -------- ---------- ---------- ---------
Notes to the preliminary report
1. Basis of preparation
The unaudited Preliminary Report has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 30 September 2016.
The Preliminary Report does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006 and has not been audited.
Comparative figures in the Preliminary Report for the year ended 30 September 2015 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 2015, as described in those financial statements. New standards or interpretations which came into effect for the current reporting period did not have a material impact on the net assets or results of the Group.
The Preliminary Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 29 November 2016. Copies will be available to members of the public upon application to the Company Secretary at Dowlish Ford, Ilminster, Somerset, TA19 0PF.
2. Segmental analysis
The Company's segmental reporting reflects the information that management uses within the business. The business is divided into four market sectors, being Aerospace & Defence, Life Sciences, Industrial and Scientific Research, 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 and telecommunications. Scientific Research covers academic and government funded research including major multi-national projects.
Aerospace Life Scientific & Defence Sciences Industrial Research Corporate Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 For year ended 30 September 2016 -------------------------- ----------- ---------- Revenue Total revenue 19,977 7,904 59,875 3,874 - 91,630 Inter and intra-division - - (5,579) - - (5,579) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- External revenue 19,977 7,904 54,296 3,874 - 86,051 Divisional expenses (18,055) (6,017) (42,719) (2,881) (1,342) (71,014) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- EBITDA(1) 1,922 1,887 11,577 993 (1,342) 15,037 -------------------------- ----------- ---------- ----------- ----------- ---------- --------- EBITDA % 9.6% 23.9% 21.3% 25.6% - 17.5% Depreciation and amortisation (545) (335) (1,776) (310) (431) (3,397) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Operating profit before amortisation of acquired intangible assets 1,377 1,552 9,801 683 (1,773) 11,640 Amortisation of acquired intangible assets, gain on bargain purchase and goodwill impairment - - - - (1,456) (1,456) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Operating profit 1,377 1,552 9,801 683 (3,229) 10,184 -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Operating profit margin % 6.9% 19.6% 18.1% 17.6% - 11.8% -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Add back amortisation of intangibles, impairment of goodwill, gain on bargain purchase and non-recurring items 108 53 960 37 2,916 4,074 Adjusted operating profit 1,485 1,605 10,761 720 (313) 14,258 -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Adjusted profit margin % 7.4% 20.3% 19.8% 18.6% - 16.6% -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Finance costs - - - - (88) (88) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Profit before income tax expense 1,377 1,552 9,801 683 (3,317) 10,096 -------------------------- ----------- ---------- ----------- ----------- ---------- ---------
(1)EBITDA = Earnings before interest, tax, depreciation and amortisation
Management have added back the amortisation of intangibles, gain on bargain purchase, impairment of goodwill, restructuring costs, provision for export compliance risk and transaction fees in the above analysis. This has been shown because the Directors consider the analysis to be more meaningful excluding the impact of this non-recurring expense.
2. Segmental analysis (continued) Aerospace Life Scientific & Defence Sciences Industrial Research Corporate Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 For year ended 30 September 2015 -------------------------- ----------- ---------- Revenue Total revenue 19,880 8,978 51,892 3,866 - 84,616 Inter and intra-division (76) - (5,838) - - (5,914) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- External revenue 19,804 8,978 46,054 3,866 - 78,702 Divisional expenses (17,112) (7,067) (35,885) (3,058) (783) (63,905)
-------------------------- ----------- ---------- ----------- ----------- ---------- --------- EBITDA(1) 2,692 1,911 10,169 808 (783) 14,797 -------------------------- ----------- ---------- ----------- ----------- ---------- --------- EBITDA % 13.6% 21.3% 22.1% 20.9% - 18.8% Depreciation and amortisation (572) (322) (1,746) (129) (130) (2,899) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Operating profit before amortisation of acquired intangible assets 2,120 1,589 8,423 679 (913) 11,898 Amortisation of acquired intangible assets - - - - (1,604) (1,604) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Operating profit 2,120 1,589 8,423 679 (2,517) 10,294 -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Operating profit margin % 10.7% 17.7% 18.3% 17.6% - 13.1% -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Add back restructuring costs 20 23 1,156 5 - 1,204 Operating profit excluding restructuring costs 2,140 1,612 9,579 684 (2,517) 11,498 -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Adjusted profit margin % 10.8% 18.0% 20.8% 17.7% - 14.6% -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Finance costs - - - - (188) (188) -------------------------- ----------- ---------- ----------- ----------- ---------- --------- Profit before income tax expense 2,120 1,589 8,423 679 (2,705) 10,106 -------------------------- ----------- ---------- ----------- ----------- ---------- ---------
Management have added back the restructuring costs in the above analysis. This has been shown because the Directors consider the analysis to be more meaningful excluding the impact of this non-recurring expense.
All of the amounts recorded are in respect of continuing operations.
Analysis of net assets / (liabilities) by location:
2016 2016 2016 2015 2015 2015 Assets Liabilities Net Assets Assets Liabilities Net Assets GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------- ------------ ----------- -------- ------------ ----------- United Kingdom 70,336 (30,580) 39,756 50,359 (12,999) 37,360 USA 59,077 (9,112) 49,965 50,193 (9,679) 40,514 Continental Europe 726 (318) 408 872 (389) 483 Asia Pacific 48 (5) 43 15 (5) 10 -------- ------------ ----------- -------- ------------ ----------- 130,187 (40,015) 90,172 101,439 (23,072) 78,367 -------- ------------ ----------- -------- ------------ ----------- 2. Segmental analysis (continued)
Analysis of revenue by destination:
2016 2015 GBP000 GBP000 -------- -------- United Kingdom 17,247 14,897 USA 34,918 34,762 Continental Europe 19,189 16,890 Asia Pacific and Other 14,697 12,153 Total revenue 86,051 78,702 -------- -------- 3. Income tax expense
Analysis of tax charge in the year
2016 2015 GBP000 GBP000 Current taxation UK Corporation tax 1,760 1,480 Overseas tax 887 724 Adjustments in respect of prior year tax charge (77) (983) -------- -------- Total current tax 2,570 1,221 -------- -------- Deferred tax Origination and reversal of temporary differences 218 274 Adjustments in respect of prior year deferred tax 290 1,152 Impact of change in the (30) - UK tax rate -------- -------- Total deferred tax 478 1,426 Income tax expense per income statement 3,048 2,647 -------- -------- 4. 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:
2016 2015 Number of shares used for basic earnings per share 24,248,471 24,115,878 Dilutive shares 436,112 405,311 Number of shares used for dilutive earnings per share 24,684,583 24,521,189 ----------- -----------
A reconciliation of the earnings used in the earnings per share calculation is set out below:
2016 2015 pence pence per GBP000 per share GBP000 share ------- ----------- ------- ------- Basic earnings per share 7,048 29.1p 7,459 30.9p Amortisation of acquired intangible assets (net of tax) 930 3.8p 1,184 4.9p Goodwill impairment 771 3.2p - - Gain on bargain purchase of Alfalight (578) (2.4p) - - Provision for regulatory compliance 500 2.1p - - Restructuring costs (net of tax) 1,261 5.2p 891 3.7p Transaction fees (net of tax) 373 1.5p - - ------- ----------- ------- ------- Total adjustments net of income tax expense 3,257 13.4p 2,075 8.6p ------- ----------- ------- ------- Adjusted basic earnings per share 10,305 42.5p 9,534 39.5p ------- ----------- ------- ------- Basic diluted earnings per share 7,048 28.6p 7,459 30.4p ------- ----------- ------- ------- Adjusted diluted earnings per share 10,305 41.7p 9,534 38.9p ------- ----------- ------- -------
Basic and diluted 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.
5. Dividends 2016 2015 GBP000 GBP000 -------- -------- Final 2015 dividend paid in 2016: 5.2p per share (Final 2014 dividend paid in 2015: 4.6p per share) 1,254 1,101 2016 Interim dividend paid: 3.3p per share (2015: 3.0p) 801 722 -------- -------- 2,055 1,823 -------- --------
The Directors propose a final dividend of 5.7p per share making the total dividend paid and proposed in respect of the 2016 financial year 9.0p (2015: 8.2p).
6. Cash generated from operating activities 2016 2015 GBP000 GBP000 -------- -------- Profit before income tax 10,096 10,106 Adjustments for: - Amortisation of acquired intangible assets 1,263 1,604 - Amortisation of other intangible assets 355 301 - Gain on bargain purchase (578) - of Alfalight - Impairment of goodwill 771 - - Depreciation 3,042 2,715 - Loss on disposal of property, plant and equipment - 508 - Share based payment charge 638 485 - Finance income (39) (26) - Finance costs 127 214 -------- -------- Total 5,579 5,801 Changes in working capital - Inventories 223 (729) - Trade and other receivables (4,706) (1,101) - Trade and other payables 2,705 615 Total (1,778) (1,215) Cash generated from operating activities 13,897 14,692 -------- --------
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(END) Dow Jones Newswires
November 29, 2016 02:00 ET (07:00 GMT)
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