TIDMGHH
RNS Number : 9490T
Gooch & Housego PLC
30 November 2021
For immediate release 30 November 2021
Gooch & Housego PLC
("Gooch & Housego", "G&H", the "Company" or the
"Group")
RESULTS FOR THE YEARED 30 SEPTEMBER 2021
Gooch & Housego PLC (AIM: GHH), the specialist manufacturer
of photonic components and systems, today announces its audited
results for the year ended 30 September 2021.
Year ended 30 September 2021 2020 Change
Revenue (GBPm) 124.1 122.1 1.6%
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Adjusted profit before tax
(GBPm)* 12.6 9.8 29.4%
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Adjusted basic earnings per
share (pence)* 41.0p 30.5p 34.4%
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Statutory profit before tax
(GBPm) 4.7 5.4 (13.2%)
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Basic earnings per share (pence) 13.6p 15.1p (9.9%)
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Total dividend per share (pence) 12.2p - N/A
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Net debt excluding IFRS16
(GBPm) 2.6 6.5 (GBP3.9m)
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Net debt (GBPm) 9.2 14.7 (GBP5.5m)
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-- adjusted figures exclude the amortisation of acquired
intangible assets, non-underlying items being restructuring costs,
site closure costs, settlement of lease litigation, interest
thereon and interest on deferred consideration, together with the
related tax impact.
Strategic
-- Trading reflected a strong and improving end markets and
initial benefits from our manufacturing streamlining programme,
more than offsetting currency headwinds and some supply chain
issues.
-- Industrial laser demand continues to be strong, driven by 5G
rollout, use of new more flexible materials in microelectronic
manufacturing and high worldwide demand for semiconductors.
-- Medical lasers continue to grow as elective surgery recovers.
Medical diagnostics remain at previous high levels.
-- Ambitious manufacturing streamlining programme is largely
complete, reducing manufacturing sites from 12 to 9. Previously
announced annual profit benefit of GBP1.75m is on track starting
FY2022.
-- Continued investment in R&D delivering strong returns
with a record new product revenue contribution.
-- G&H remains committed to long term goals of further
diversification into A&D and life sciences and moving up the
value chain. We intend to pursue these policies vigorously through
internal investment and where appropriate, acquisitions.
Financial
-- Revenue of GBP124.1m, up by 1.6% or 6.4% excluding foreign exchange.
-- New products contributed a record GBP18.1m of revenue in FY2021 (FY2020: GBP16.9m).
-- Adjusted profit before tax of GBP12.6m, up 29.4%. Reported PBT GBP4.7m, down 13.2%.
-- Strong cash flow over the year leading to further debt
reduction. Net debt, excluding IFRS16, of GBP2.6m places G&H in
a strong position to pursue strategic goals.
-- Return of progressive dividend policy with a proposed full year dividend of 12.2p
-- Year end order book of GBP97.8m, up 5.6%, or 8.6% excluding
foreign exchange. Industrial and medical lasers are demonstrating a
sustained recovery, while telecommunications and medical
diagnostics continue to perform at a high level.
Mark Webster, Chief Executive Officer, commented:
" Trading during the year reflected a sustained recovery in the
industrial and medical laser markets and a robust performance from
telecommunications and medical diagnostics. An increasingly
productive R&D group delivered record levels of new product
revenue during the year.
"There was some drag on the Group's overall performance due to
currency headwinds, self-isolation requirements and supply chain
issues in parts of the business as we emerge from the pandemic. It
was, however, a far better business environment than last year and
we expect further improvement in the future.
"Our restructuring programme is enhancing the Group's margins
and enabling us to better respond to our customers' needs. We are
committed to vigorously pursuing our long term strategic goals and
will continue to invest in R&D and where appropriate,
acquisitions.
"The Board remains confident that G&H is well positioned to
deliver further progress in FY2022 and substantial long-term growth
."
For further information please contact:
Gooch & Housego PLC Mark Webster / Chris Jewell 01460 256440
Christopher Baird / David
Investec Bank plc (Nomad Anderson
& Broker) 020 7597 5970
Mark Court / Sophie Wills
Buchanan g@h@buchanan.uk.com 020 7466 5000
Webcast
A pre-recorded presentation of the full year results, by Mark
Webster, Chief Executive Officer, and Chris Jewell, Chief Financial
Officer, will be available from 7.05am today, 30 November 2021, at
the following link:
https://webcasting.buchanan.uk.com/broadcast/6193ee6fbfda32066a17010f
Analyst Q&A meeting
A Q&A session for analysts will be held at 11:00am today, 30
November 2021. For further details please phone Buchanan on 020
7466 5000 or email g&h@buchanan.uk.com .
2022 Expected Financial Calendar
Annual General Meeting 23 February 2022
Interim Results announcement June 2022
Financial Year End 30 September 2022
Announcement of results for the year ended December 2022
30 September 2022
Chairman's Statement
Group Overview
I have been delighted with the trading performance of the Group
in the year. Nearly all of our markets have now returned to growth
as economies emerge from the pandemic confirming the long-term
strong growth prospects of the Group. Across all of the markets
that we serve we are well positioned to benefit from the increasing
use of our photonic technologies and systems capabilities to solve
our customers' most technically challenging needs.
The consistent pursuit of our strategic objectives has been a
key enabler of the Group's performance in 2021. Our focus on
markets with strong growth drivers as well as our proven track
record of supporting our customers with the development of their
most sophisticated products has underpinned the Group's return to
growth.
Our programme to streamline our manufacturing facilities is
progressing well. The significant investment in our Ilminster
precision optics centre of excellence is now substantially complete
allowing that site to absorb production activities from our
Glenrothes, Scotland and St Asaph, Wales sites. This project,
together with the consolidation of our Baltimore, MD and Boston, MA
facilities is helping us deliver margin enhancement, but also means
we are able to offer a broader, more compelling range of products
and capabilities. Our customers are increasingly looking to us to
provide them with more advanced, integrated designs consistent with
our strategic objectives.
The Environment and our Communities
The Board recognises how important the environment is to all of
our stakeholders. We firmly believe that photonic technologies are
a key enabler in the migration to a more sustainable world. But we
are also focused on our own impact on the environment. We now track
carbon emissions as one of our key performance indicators and have
a programme in place to achieve year-on-year reductions. As part of
that programme we installed solar panels at our Ilminster facility
which, along with the existing solar panels fitted at our Torquay
facility, means that we are now generating approximately 600 Kwp of
electricity from solar sources. We will extend that capability in
the current financial year by installing solar panels at our
Ashford facility.
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 Company monies the amounts they raise.
The Board
Peter Bordui left the Board in February 2021 after nine years of
service. We are extremely grateful for the direction and insights
he provided through what was a period of great strategic and
operational progress for G&H.
We were very pleased to be able to welcome Jim Haynes to the
Board. Jim brings to the Group extensive experience from his
distinguished executive career in the photonics industry where he
held a range of senior leadership roles in engineering and
operations, most recently Executive Vice President, Operations, at
Oclaro/Lumentum.
Dividend
Given the strength of the business recovery in the year and the
positive outlook for the coming trading period, the Board is
proposing a final dividend of 7.7 pence per share for approval at
the Company's Annual General Meeting on 23 February 2022, giving a
total of 12.2 pence for the year. Payment of the dividend will be
made on 25 February 2022, to shareholders on the register as at 21
January 2022.
People
Our people are our most important asset. Their skills and
experience are key to ensuring the long-term sustainability of our
business. Our employees have shown great commitment to the business
not only by adapting over the last 18 months to the new working
practices required by COVID-19 but also in delivering the
manufacturing facility streamlining projects. Their positive
attitude has impressed the Board and we offer our appreciation and
thanks for our employees' hard work and dedication through the
year.
Outlook
Looking forward, the Board is very optimistic for G&H. We
are well positioned in our growth markets. Our restructuring
programmes are enhancing the Group's margins and making it better
able to respond to our customers' needs. Whilst the business is
facing some near term challenges in recruiting to support our
growth, and there are some constraints in our supply chains, we
have no doubt we can build on the strong foundations of our
technical expertise, our longstanding customer relationships and
the skills and dedication of our people to deliver substantial
future growth.
Gary Bullard
Chairman
30 November 2021
Chief Executive Officer's Statement
FY2021 Performance
During the financial year 2021 G&H achieved revenue of
GBP124.1m, representing an increase of 1.6% over previous year
(FY2020: GBP122.1m), or excluding the impact of foreign exchange an
increase of 6.4%. Adjusted profit before tax was GBP12.6m, an
increase of 29.4% over last year (FY2020: GBP9.8m).
This reflected a strong and improving end market demand and
initial benefits from our manufacturing streamlining programme,
more than offsetting currency headwinds and some supply chain
constraints. Overall, it was a far better business environment than
last year, and we expect further improvement in the future.
Industrial laser demand continues to be strong, especially the
semiconductor market, where there are a range of exciting growth
opportunities for G&H technologies. Hi-reliability fibre
couplers delivered a good performance, with greater usage in space
satellites complementing the undersea cable business.
We completed a number of significant deliveries to our aerospace
and defence customers. Life sciences performed well across the
board. Medical diagnostics remained at previous high levels, with a
product designed to improve respiratory function and oxygen uptake,
as part of a ventilator system, performing particularly well.
Orders for our specialist medical laser products have been strong
as the market recovers from the low levels of elective surgery
during the pandemic.
Our ambitious manufacturing streamlining programme has continued
throughout FY2021, with further site consolidation and outsourcing
of established products. The previously announced profit benefit of
this programme is on track to be delivered in FY2022.
We have continued to invest in an active R&D portfolio and
are working closely with many of our customers on their next
generation products. New products contributed a record GBP18.1m of
revenue in FY2021 (FY2020: GBP16.9m).
The Group delivered strong cash flow over the year and has
further reduced its level of borrowings. Net debt, excluding lease
liabilities was GBP2.6m at the year end, which places G&H in a
strong position to pursue our strategic goals.
G&H has a robust order book. As at 30 September 2021 it
stood at GBP97.8m (30 September 2020: GBP92.4m), 5.8% higher than
the same period previous year or 8.6% excluding foreign exchange.
The strength of the order book provides the Group with good
momentum as it enters the new financial year. Industrial and
medical lasers are demonstrating a sustained recovery, while
telecommunications and medical diagnostics continue to perform at a
high level.
Strategic Goals
Our long-term strategic goals of diversification and moving up
the value chain have stood us in good stead during a challenging
period. As the business environment is now showing significant
improvement, we intend to pursue them with renewed vigour through
internal investment and where appropriate, acquisitions.
Aerospace and defence (A&D) and life sciences provide a
counterbalance to the exposure of the industrial laser business to
the economic cycle. These sectors both have high product quality
and compliance barriers to entry and tend to value systems over
components. As they move towards greater use of photonics, G&H
is increasingly well placed to serve these customers with our
photonic technologies and enhanced systems capabilities.
Our aim is to provide a broadly equal split between the three
sectors, industrials, A&D and life sciences. In FY2021 A&D
represented 33.1% of our revenue and life sciences 22.1%. This
represents considerable progress over the last few years, in
particular with life sciences, which has benefited from organic
growth in the traditional G&H areas of optical coherence
tomography (OCT) and medical lasers and the acquisition of ITL.
Systems, subsystems and modules represent 33.2% of revenue. We
have substantially improved our software, firmware, electronic and
mechanical engineering capability, in large part through the
acquisition of ITL. Its facility in Ashford, Kent has provided a
platform for the creation of a systems engineering hub.
Streamlining of G&H's Manufacturing Base
Our streamlining programme has progressed well during FY2021. At
the beginning of the financial year, we had 12 manufacturing sites
and now have nine. We moved our Baltimore, MD production to our
Boston, MA site creating a single US fibre facility. In the UK we
have moved our Glenrothes, Scotland and St Asaph, Wales
manufacturing to Ilminster, Somerset, creating a UK precision
optics (PO) hub. Our world leading optical systems engineering team
has been relocated to an innovation hub in St Asaph and they remain
focused on target development projects. Outsourcing of our
Ilminster AO production to a South-East Asian contract manufacturer
is well advanced and the final product transfers are expected to be
completed soon.
This has been achieved at a time when travel, especially to
Asia, has been challenging and the results are a tribute to the
tenacity of the G&H teams involved in delivering these
projects. The previously announced FY2022 profit benefit of
GBP1.75m is on track to be delivered.
We will continue to assess future opportunities for
consolidation of our operations.
Research and Development (R&D)
Our global R&D team has reaped considerable benefit from
concentrating our resources on fewer, higher return projects that
the Group has identified as offering the best growth potential for
our photonic technologies and system capabilities. During FY2021 we
introduced 48 new products and delivered record new product
revenue.
G&H continues to work closely with our industrial laser
partners to develop their next generation products. There is
especially strong activity with lasers that are used to manufacture
semiconductors. Our industrial laser development activity ranges
from 'state of the art' extreme ultra-violet ('EUV') lithography
lasers used for nanoelectronics, redesigned market leading
germanium AO modulators and specialist AO deflectors, through to
providing critical components for the next generation designs of
established products.
G&H's 'laser engine' technology is gaining real traction in
directional sensing for wind turbines and security and defence
applications. Our partner company is now selling their directional
sensing unit for wind turbines into the large Chinese market.
Unmanned aerial vehicles (UAVs) represent significant growth
potential for G&H. We have expertise in the design, engineering
and manufacturing of bespoke complex optical arrays in the IR
spectrum for UAV imaging and communication systems. This area has
been a source of multiple new products and systems in FY2021. We
are currently working on 'thermal overlay' of our traditional
optical sighting systems for armoured vehicles. This will be the
first new product to come out of our innovation hub in St
Asaph.
In November 2020, in collaboration with NEC Corporation and JAXA
(Japan Aerospace Exploration Agency), G&H fibre optic photonics
and systems were at the heart of the successful launch of a
satellite laser communication system. To our knowledge this is the
first system of its type, and the aim is to demonstrate that laser
communications can be a viable solution for future high speed and
scalable space communications. This success has raised the profile
of the teams based in Torquay and Boston, MA that developed the
system and has led to further contracts in this area.
OCT is a non-invasive laser-based technology that delivers cross
sectional diagnostic images. G&H is the market leader in
supplying the technology for retinal scanning, which our customers
deploy in opticians' offices. We are working with our partners on
developing the next generation systems. The same technology is
being applied to cancer and cardiovascular disease diagnosis. Our
most recent cardiovascular diagnostic collaboration is now
undertaking medical registration trials in the USA.
The acquisition of ITL brought a burgeoning medical diagnostics
business and enhanced system capability. In addition to developing
the next generation of existing products the R&D team at ITL
are working on a range of novel medical diagnostics systems and the
Group has expanded to meet the demands of our customers. We have
three collaborations with Chinese medical diagnostics companies
through our facility in Shanghai. We believe this has the potential
to be a source of substantial growth as the Chinese Government is
backing the development of a 'home grown' medical diagnostics
industry.
Corporate Responsibility
We are proud of the way the organisation has responded to the
challenges of the pandemic and have worked hard to ensure all our
sites are fully COVID compliant. The health and safety of our
staff, customers and suppliers remains our priority.
The Board is accountable to its shareholders and is committed to
the highest standards of corporate governance. To this end the
Company has adopted the UK Corporate Governance Code (2018). In
order to ensure the Company is meeting the most up to date
standards, regular reviews of policy are held by the relevant
committees of the Board of Directors.
G&H is committed to 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 women in all shortlist applications and we
are actively engaged with encouraging women in engineering.
G&H is committed to conducting our business in an
environmentally responsible and sustainable manner. We are
consolidating our manufacturing facilities, and introducing other
initiatives aimed at reducing our environmental footprint, such as
the introduction of solar power at our three UK sites. The
Executive Directors have specific environmental management and
carbon reduction goals in their remuneration metrics.
Outlook
The business environment improved markedly over the
pandemic-affected 2020. We believe there will be further
improvement in the next financial year and over the longer
term.
FY2021 saw strong demand for industrial and medical lasers,
telecommunications and medical diagnostics. The drivers of a
sustained recovery in industrial lasers remain in place, as new
technologies such as 5G roll out, along with greater use of new
more flexible materials in microelectronic manufacturing and strong
worldwide demand for semiconductors. We expect this demand led
growth to continue in these sectors. Our year end order book is
robust and 8.6% higher than the same time last year, excluding the
impact of foreign exchange.
A&D sub-sectors of space satellite communications, optical
arrays for gimbals on UAVs, and targeting and sighting systems all
performed well in the last financial year. G&H supplies laser
based navigational products for commercial and military aircraft.
Our internal forecasts expect that the commercial aspect of this
business will start to return to growth in 2023.
In FY2021 there was some 'drag' on performance due to currency
headwinds, self-isolation and supply chain issues in parts of our
business. It is possible that we may still see these factors affect
performance in the near term. Mitigating actions have been taken by
management in each of these areas.
G&H's plans to streamline our manufacturing operations have
been largely completed during FY2021 and we are on track to deliver
the previously announced FY2022 profit improvements. The benefits
of having our US fibre optic capability housed on a single site and
our UK precision optics (PO) production on one site should start to
positively impact performance. Ilminster has throughout its history
been a mixed AO and PO site and the efficiency and capacity
improvements we envisage as the exclusively PO site embraces its
new role should enable an enhanced offering to its predominately
A&D customers.
New products are becoming an increasingly important part of our
portfolio, as we continue to deliver record new product sales from
an increasingly productive R&D group. We remain committed to
invest in those areas identified as having the greatest potential.
There continues to be substantial long term growth potential for
our photonic technologies and system capabilities in all our target
sectors.
G&H remains committed to our long-term strategic goals of
further diversification and moving up the value chain. We intend to
vigorously pursue these goals through internal investment and where
appropriate, acquisitions. The Board remains confident that G&H
is well positioned to deliver further progress in FY2022 and
substantial long-term growth.
Mark Webster
Chief Executive Officer
30 November 2021
Operations Review
Industrial
Revenue GBP55.6m (2020: GBP54.8m)
Adjusted Operating Profit GBP7.1m (2020: GBP4.1m)
Operating Profit GBP4.5m (2020: GBP3.2m)
Percentage of Revenue 44.8% (2020: 44.9%)
Market Drivers
-- Post pandemic recovery in the industrial laser market.
-- Roll out of 5G, new more flexible materials in
microelectronic manufacturing and greater worldwide demand for
semiconductors.
-- Next generation products such as EUV lithography lasers for
nanoelectronics and new design germanium modulators.
-- Increasing investment in continental connectivity of data centres.
-- 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
1.4% (7.2% excluding foreign exchange) compared to the prior year.
We saw strong and sustained growth in our industrial laser and
semiconductor revenues thanks to the recovery of the global economy
from the effects of the pandemic. Our Asian markets led the
recovery from the beginning of the calendar year but this was then
supported in the second half of the trading period by demand from
our US and European markets. The roll out of new technologies such
as 5G, along with greater use of new materials in microelectronic
manufacturing, are fuelling demand. We secured important new
programme positions for our recently developed germanium
acousto-optic modulator product, which will lead to recurring
revenues for many years to come. This product is integrated in to
the heart of the most advanced and efficient laser systems
currently being developed by our OEM customers for use in
semiconductor manufacturing. The movement of our Ilminster AO
Q-switch production to a South East Asian manufacturer will enable
us to more effectively compete in the increasingly price sensitive
China market.
Our sensing modules generally form part of large infrastructure
projects and there were some end customer programme delays that
impacted on our revenues in this subsector during the period.
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 underpinning demand for its products in this
area.
Volumes for our hi-reliability fibre couplers used in undersea
cable networks remained at the raised level seen in FY2020. There
is strong demand thanks 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.
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 FY2021 G&H introduced six new products in industrials
generating GBP5.1m of revenue. We also completed important
milestones on a multi-year contract with a laser system company to
develop 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 GBP41.1m (2020: GBP41.4m)
Adjusted Operating Profit GBP3.1m (2020: GBP2.8m)
Operating Profit GBP0.6m (2020: GBP1.5m)
Percentage of Revenue 33.1% (2020: 33.9%)
Market Drivers
-- A&D markets require high product quality, reliability and
high performance in harsh environments, which plays to G&H's
strengths.
-- 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.
-- Direct energy capability will utilise optical and laser expertise.
-- Emerging inertial navigation platforms.
Performance
Our A&D revenues declined by 0.7% during FY2021, compared
with the equivalent period last year, but grew 4.3% excluding
foreign exchange. In the UK we completed deliveries of optical
sensor systems on several significant vehicles programmes working
closely with the overall vehicle manufacturers. Future UK and
European vehicle sustainment programmes which include the upgrade
of the vehicles' optical sensor suite provide G&H with the
prospect of significant future programme business in this area. We
believe the investment we have made in prototyping vehicle based
multi-wave band sensor systems positions G&H well to be
selected on these programmes.
The launch of a G&H enabled satellite laser-based
communication system was completed in November 2020. To the best of
our knowledge this is the first of its type and this 'proof of
principle' should provide the basis for further business in
standard and constellation satellites and near space UAVs.
In the US our deliveries of gimballed optical systems for a
multi-year unmanned air vehicle contract came to an end and
although new programme positions were agreed for secure
communication systems using photonics technologies, these will only
move in to volume production in the coming financial years.
In the US we secured further business for our IR optical arrays
used in the gimbals on UAVs for targeting, range finding and
surveillance. They will come on stream with volume production in
the near term.
Our Boston, MA facility transitioned two significant programmes
from development to the volume production phase and we expect
orders for further productions volumes to be secured in the coming
financial year.
G&H has a market leading position in supplying laser based
navigational systems for military and commercial aircraft. Our
internal forecasts do not expect the commercial aspect of this
business to return to growth until FY2023. This business improved
across FY2021 and we are maintaining this important capability at
our Moorpark, CA facility.
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 next generation requirement for fibre optics on
satellites.
-- Periscopes and sighting systems for land based armoured fighting vehicles.
-- Opto-mechanical subsystems for unmanned aerial vehicles.
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
investments made in new surface polishing machines for our newly
formed UK Precision Optics centre of excellence in Ilminster 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 FY2021 G&H
introduced 33 new products and generated GBP9.4m 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 GBP27.4m (2020: GBP25.9m)
Adjusted Operating Profit GBP4.2m (2020: GBP4.7m)
Operating Profit GBP3.5m (2020: GBP4.4m)
Percentage of Revenue 22.1% (2020: 21.2%)
Market Drivers
-- Strong post pandemic recovery in laser enabled aesthetic
procedures to tackle the pent-up demand caused by the COVID-19
response.
-- 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 supports demand for our capabilities.
-- 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 5.9% in the year
to 30 September 2021, compared with the prior year. When measured
at constant currency this represents growth of 8.1%. Medical
diagnostic demand remained at the high levels seen in the second
half of FY2020. The continued strong performance of a product
designed to improve respiratory function as part of a ventilator
system has been a key factor.
In the financial year our ITL business secured important new
programme positions with customers seeking our expertise to
productionise medical diagnostic product concepts. In line with our
established business model, we expect to secure recurring
production revenues from these programmes once the initial work to
develop producible product has been completed. We have expanded the
medical diagnostics R&D group to meet the demand. The enhanced
software, firmware, electronic and mechanical engineering
capability enables further systems business within and outside
G&H's life science business sector.
OCT systems and components delivered growth during the period.
Demand for our specialist medical laser products, which was
adversely affected by the pandemic induced reduction in elective
procedures during FY 2020, has started to demonstrate a marked
improvement in performance. Medical lasers using our components are
able to provide new cosmetic procedures to patients, for example to
significantly clear acne scarring. Overall these two sub-sectors
were up 27% in the year, excluding foreign exchange.
Applications
-- Optical coherence tomography (OCT) primarily used in retinal
imaging for the diagnosis of glaucoma and macular degeneration, but
now including 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.
-- Systems: 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
FY2021 G&H introduced nine new products and generated GBP3.6m
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 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
Having demonstrated its resilience during the pandemic the
Group's trading recovered well in FY2021. Group revenue for the
year totalled GBP124.1m. This represents growth of 1.6% over the
previous year, or 6.4% excluding foreign exchange.
We have seen sustained 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 deliveries to a number of important defence programmes grew,
more than offsetting reduced demand from our commercial aerospace
customers.
Our order book stood at GBP97.8m at the end of the financial
year and intake exceeded revenue by 9% in the second half of the
year providing good visibility for future revenue growth.
The Group's adjusted profit before tax increased to GBP12.6m
(2020: GBP9.8m) representing a margin of 10.2% (2020: 8.0%). After
the impact of adjusting items, including restructuring costs and
amortisation charges for acquired intangible assets the Group's
full year statutory profit before tax was GBP4.7m compared with
GBP5.4m in the prior year. 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, acquisition and disposal
items excluded from this measure. Further details of alternative
performance measures are provided later in this review.
We were pleased with the Group cash performance in the year with
working capital levels reducing by GBP0.5m despite the increase in
volumes of 6.4% compared to the prior year. At the same time
investment in our production facilities continued with total
capital investments of GBP6.2m made in the year. Our net debt
excluding lease liabilities fell from GBP6.5m at the end of the
prior year to GBP2.6m representing leverage of just 0.1x meaning we
are well placed to execute on our acquisition strategy.
Revenue
REVENUE
------------------------------------------------------------------
2021 2020
----------------- ------------------
Year ended 30 September GBP'000 % GBP'000 %
--------------------------- -------- ------- -------- ------
Industrial 55,552 44.8% 54,811 44.9%
--------------------------- -------- ------- -------- ------
A&D 41,089 33.1% 41,390 33.9%
--------------------------- -------- ------- -------- ------
Life Sciences/Biophotonics 27,433 22.1% 25,894 21.2%
--------------------------- -------- ------- -------- ------
Group Revenue 124,074 100.0% 122,095 100%
--------------------------- -------- ------- -------- ------
Revenue for the year totalled GBP124.1m. Revenues from our
semiconductor and industrial laser markets recovered strongly from
the end of the first financial quarter. Demand for hi-reliability
fibre couplers also grew albeit more slowly from the higher prior
year comparative. These were partly offset by reductions in
revenues to sensing markets where customer programme slowdowns
impacted revenues.
In A&D significant optical system deliveries for armoured
vehicles were completed on a number of customer programmes more
than offsetting low levels of demand from our commercial aerospace
customers.
Our life sciences/biophotonics business delivered year-on-year
growth of 5.9% (8.1% at constant currency). Our medical diagnostics
business grew further despite strong prior year comparators and
there was a pleasing return of demand for our component used in
skin medical laser treatments which had been impacted by the
pandemic slowdown in the previous year.
Operating Profit
The Group's statutory operating profit was GBP5.4m (2020:
GBP6.3m) after a charge for items excluded from adjusted operating
profit of GBP7.9m (2020: GBP4.4m) including GBP5.9m (2020: GBP2.6m)
in respect of the Group's manufacturing footprint consolidation
programme and GBP2.1m in respect of the amortisation of intangible
assets arising on business combinations (2020: GBP2.7m) Adjusted
operating profit was GBP13.3m (2020: GBP11.2m) with the increase
the result of improving volumes and the initial financial benefits
of the Group's restructuring programme. 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 Earnings Operating
profit costs tax per share cash flow
---------------- ---------------- ----------------- ----------------- ------------------ --------------- -----------------
Year ended 30 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
September GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 pence pence GBP000 GBP000
---------------- ------- ------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Reported 5,401 6,334 (721) (942) 4,680 5,392 (1,276) (1,610) 13.6p 15.1p 16,822 21,561
---------------- ------- ------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Amortisation
of acquired
intangible
assets 2,081 2,676 - - 2,081 2,676 (460) (397) 6.5p 9.1p - -
---------------- ------- ------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Restructuring
and site
closure 5,860 2,609 - - 5,860 2,609 (1,151) (392) 18.8p 8.9p 5,102 1,360
---------------- ------- ------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Settlement of
lease dispute - (410) - (818) - (1,228) - 271 - (3.8p) - (410)
---------------- ------- ------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Interest on
deferred
consideration - - - 303 - 303 - - - 1.2p - -
---------------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Tax charge
arising
from
restatement
of UK Deferred
tax at 25% - - - - - - 519 - 2.1p - - -
---------------- ------- ------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Adjusted 13,342 11,209 (721) (1,457) 12,621 9,752 (2,368) (2,128) 41.0p 30.5p 21,924 22,511
---------------- ------- ------- ------- -------- ------- -------- -------- -------- ------ ------- ------- --------
Net Finance Costs
The net underlying interest expense of GBP0.7m (2020: GBP1.5m)
reduced by GBP0.8m. The reduction was the result of repayments made
during the year by the Group against its credit facilities,
detailed further below.
Tax
The tax charge for the year was GBP1.3m (2020: GBP1.6m) with an
underlying tax charge of GBP2.4m (2020: GBP2.1m) after excluding a
credit on non-underlying items of GBP1.1m. This resulted in an
underlying effective tax rate of 18.8% (2020: 21.8%). The reduction
in the rate was largely due to adjustments in respect of prior year
balances arising from enhanced capital allowances. 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 increased by 34.4% to 41.0p
(2020: 30.5p), reflecting the increased profitability in the year.
Basic earnings per share reduced 9.9% to 13.6p (2020: 15.1p). This
reduction was due to the non-recurring items incurred in the year
in relation to the Group's site rationalisation programme.
Cash Generation
Cash flow generated from operating activities was GBP16.8m, down
from GBP21.6m in the prior year. This reduction was due to the
non-underlying costs incurred in relation to the site
rationalisation programme in the year amounting to GBP5.1m.
Adjusted cashflow generated from operating activities, which
excluded these non-underlying costs, was GBP21.9m (2020: GBP22.5m).
This was the result of improved profitability, supported by
disciplined working capital management. In total working capital
reduced by GBP0.5m in the year despite the 6.4% increase in
business volumes compared to the prior year. Cashflows for tangible
and intangible fixed asset additions totalled GBP6.2m (2020:
GBP6.4m). The final earn out payment for the Group's acquisition of
the ITL business was made in the period. The payment of GBP3.25m
represented that business achieving at its maximum level. The
payment of an interim dividend in the year totalled GBP1.1m. The
Group's strong cash generation allowed the repayment of $19.2m
(GBP14.1m) of borrowings and the Group closed the year with net
debt of GBP9.2m (2020: GBP14.7m) or GBP2.6m (2020: GBP6.5m) when
lease liabilities are excluded.
Balance Sheet
The Group's total equity at the end of the year was GBP114.3m,
an increase of GBP0.9m over the prior year. This comprised an
increase of GBP2.3m from retained earnings, a GBP0.7m increase to
reserves in relation to share schemes and a net reduction of
GBP2.1m arising from foreign exchange and hedging movements.
During the year, additions to property, plant and equipment
amounted to GBP5.4m (2020: GBP5.4m) and to intangible assets
GBP0.8m (2020: GBP1.3m).
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. 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 2021, Gooch & Housego
PLC had sufficient distributable reserves to pay dividends for the
foreseeable future.
Given the strength of the business recovery in the year and the
positive outlook for the coming trading period the Board is
proposing a final dividend of 7.7 pence per share, giving a total
of 12.2 pence per share for the year when combined with the 4.5
pence per share paid as an interim dividend in July 2021.
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 2021 the Group had available undrawn
committed and uncommitted facilities of $55.2m. The Group's
borrowings are in the form of a US$ denominated Revolving Credit
Facility (RCF). The RCF matures in April 2023.
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 2021 net debt/adjusted EBITDA was
0.1 times (30 September 2020: 0.4 times). Interest cover at 30
September 2021 was 34.2 times (30 September 2020: 10.8 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 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.
2021 2020
Income Statement Average rate
---------------
USD/GBP 1.37 1.28
------- ------
Euro/GBP 1.15 1.14
------- ------
Balance Sheet Closing rate
---------------
USD/GBP 1.35 1.29
------- ------
Euro/GBP 1.16 1.10
------- ------
Group Income Statement
For the year ended 30 September 2021
30 September 2021 30 September 2020
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 2 124,074 - 124,074 122,095 - 122,095
Cost of revenue (82,753) - (82,753) (82,845) - (82,845)
----------- --------------- --------- ----------- --------------- ---------
Gross profit 41,321 - 41,321 39,250 - 39,250
Research and development (8,147) - (8,147) (7,924) - (7,924)
Sales and Marketing (8,342) - (8,342) (7,440) - (7,440)
Administration (12,294) (7,941) (20,235) (13,759) (4,875) (18,634)
Other income 804 - 804 1,082 - 1,082
----------- --------------- --------- ----------- --------------- ---------
Operating profit 2 13,342 (7,941) 5,401 11,209 (4,875) 6,334
Finance income 1 - 1 16 818 834
Finance costs (722) - (722) (1,473) (303) (1,776)
----------- --------------- --------- ----------- --------------- ---------
Profit before income
tax expense 12,621 (7,941) 4,680 9,752 (4,360) 5,392
Income tax expense (2,368) 1,092 (1,276) (2,128) 518 (1,610)
----------- --------------- --------- ----------- --------------- ---------
Profit for the
year 10,253 (6,849) 3,404 7,624 (3,842) 3,782
----------- --------------- --------- ----------- --------------- ---------
Basic earnings
per share 41.0p (27.4p) 13.6p 30.5p (15.4p) 15.1p
Diluted earnings
per share 40.5p (27.0p) 13.5p 30.2p (15.2p) 15.0p
----------- --------------- --------- ----------- --------------- ---------
Group Statement of Comprehensive Income
For the year ended 30 September 2021
2021 2020
GBP000 GBP000
-------- --------
Profit for the year 3,404 3,782
Other comprehensive (expense)/income
- items that may be reclassified
subsequently to profit or loss
(Losses)/gains on cash flow hedges (468) 333
Currency translation differences (1,621) (2,105)
Other comprehensive expense for
the year net of tax (2,089) (1,772)
Total comprehensive income for the
year attributable to the shareholders
of Gooch & Housego PLC 1,315 2,010
-------- --------
Group Balance Sheet
For the year ended 30 September 2021
2021 2020
GBP000 GBP000
--------- ---------
Non-current assets
Property, plant and equipment 37,945 38,741
Right of use assets 5,230 6,742
Intangible assets 50,835 54,624
Deferred income tax assets 1,883 1,432
--------- ---------
95,893 101,539
Current assets
Inventories 28,150 30,580
Trade and other receivables 28,310 26,298
Cash and cash equivalents 8,352 19,734
64,812 76,612
Current liabilities
Trade and other payables (19,324) (17,971)
Borrowings (65) (64)
Lease liabilities (1,588) (1,832)
Income tax liabilities (481) (1,120)
Deferred consideration - (3,250)
--------- ---------
(21,458) (24,237)
Net current assets 43,354 52,375
Non-current liabilities
Borrowings (10,903) (26,211)
Lease liabilities (5,039) (6,364)
Provision for other liabilities
and charges (1,447) (1,692)
Deferred income tax liabilities (7,582) (6,294)
(24,971) (40,561)
Net assets 114,276 113,353
--------- ---------
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 6,054 7,675
Hedging reserve (135) 333
Retained earnings 80,087 77,075
--------- ---------
Total equity 114,276 113,353
--------- ---------
Group Statement of Changes in Shareholders' Equity
For the year ended 30 September 2021
Note 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
2019 5,008 16,000 7,262 74,793 - 9,780 112,843
Profit for the
financial
year - - - 3,782 - - 3,782
Other
comprehensive
income /
(expense)
for the year - - - - 333 (2,105) (1,772)
---------- --------- --------- ---------- --------- ------------- --------
Total
comprehensive
income /
(expense)
for the year - - - 3,782 333 (2,105) 2,010
---------- --------- --------- ---------- --------- ------------- --------
Dividends 6 - - - (1,803) - - (1,803)
Share based
payments - - - 303 - - 303
Total
contributions
by and
distributions
to owners of
the parent
recognised
directly in
equity - - - (1,500) - - (1,500)
At 30
September
2020 5,008 16,000 7,262 77,075 333 7,675 113,353
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 6 - - - (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
---------- --------- --------- ---------- --------- ------------- --------
Group Cash Flow Statement
For the year ended 30 September 2021
2021 2020
Note GBP000 GBP000
--------- ---------
Cash flows from operating activities
Cash generated from operations 7 16,822 21,561
Income tax paid (575) (1,119)
--------- ---------
Net cash generated from operating
activities 16,247 20,442
--------- ---------
Cash flows from investing activities
Acquisition of subsidiaries, net
of cash acquired (3,250) (4,750)
Purchase of property, plant and
equipment (5,399) (5,495)
Sale of property, plant and equipment 38 353
Purchase of intangible assets (844) (1,291)
Interest received 1 846
Interest paid (505) (1,399)
Legal dispute settlement - 1,580
--------- ---------
Net cash used in investing activities (9,959) (10,156)
--------- ---------
Cash flows from financing activities
Drawdown of borrowings - 8,346
Repayment of borrowings (14,093) (12,610)
Principal elements of lease payments (2,047) (1,583)
Dividends paid to ordinary shareholders (1,127) (1,803)
Net cash used by financing activities (17,267) (7,650)
--------- ---------
Net (decrease)/increase in cash (10,979) 2,636
Cash at beginning of the year 19,734 17,512
Exchange losses on cash (403) (414)
--------- ---------
Cash at the end of the year 8,352 19,734
--------- ---------
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 2020 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 2020,
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.
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
-------------------------- ------------- --------------------------- ----------- ---------- ----------
2. Segmental analysis (continued)
Aerospace Life Sciences
& Defence / Bio-photonics Industrial Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000
For year ended 30
September 2020
-------------------------- ----------- -----------------
Revenue
Total revenue 41,390 27,578 60,280 - 129,248
Inter and intra-division - (1,684) (5,469) - (7,153)
-------------------------- ----------- ----------------- ----------- ---------- ----------
External revenue 41,390 25,894 54,811 - 122,095
Divisional expenses (37,295) (20,543) (48,004) 642 (105,200)
-------------------------- ----------- ----------------- ----------- ---------- ----------
EBITDA(1) 4,095 5,351 6,807 642 16,895
-------------------------- ----------- ----------------- ----------- ---------- ----------
EBITDA % 9.9% 20.7% 12.4% - 13.8%
Depreciation and
amortisation (2,554) (964) (3,636) (731) (7,885)
-------------------------- ----------- ----------------- ----------- ---------- ----------
Operating profit
before amortisation
of acquired intangible
assets 1,541 4,387 3,171 (89) 9,010
Amortisation of acquired
intangible assets - - - (2,676) (2,676)
-------------------------- ----------- ----------------- ----------- ---------- ----------
Operating profit 1,541 4,387 3,171 (2,765) 6,334
-------------------------- ----------- ----------------- ----------- ---------- ----------
Operating profit
margin % 3.7% 16.9% 5.8% - 5.2%
-------------------------- ----------- ----------------- ----------- ---------- ----------
Add back non-underlying
items and amortisation
of acquired intangibles 1,258 263 935 2,419 4,875
Adjusted operating
profit 2,799 4,650 4,106 (346) 11,209
-------------------------- ----------- ----------------- ----------- ---------- ----------
Adjusted profit margin
% 6.8% 18.0% 7.5% - 9.2%
-------------------------- ----------- ----------------- ----------- ---------- ----------
Finance costs (128) (32) (189) (593) (942)
-------------------------- ----------- ----------------- ----------- ---------- ----------
Profit before income
tax expense 1,413 4,355 2,982 (3,358) 5,392
-------------------------- ----------- ----------------- ----------- ---------- ----------
(1)EBITDA = Earnings before interest, tax, depreciation and
amortisation
Management have added back the amortisation of acquired
intangibles, restructuring costs, site closure costs and amounts
received in respect of litigation associated with a property lease
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:
2021 2021 2021 2020 2020 2020
Assets Liabilities Net Assets Assets Liabilities Net Assets
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------- ------------ ----------- -------- ------------ -----------
United Kingdom 85,163 (28,240) 56,923 89,807 (41,676) 48,131
USA 73,858 (18,006) 55,852 86,824 (22,999) 63,825
Continental
Europe 660 (64) 596 738 (52) 686
Asia Pacific 1,024 (119) 905 782 (71) 711
-------- ------------ ----------- -------- ------------ -----------
160,705 (46,429) 114,276 178,151 (64,798) 113,353
-------- ------------ ----------- -------- ------------ -----------
For the year to 30 September 2021 non-current asset additions
were GBP4.3m (2020: GBP5.1m) for the UK and for the USA GBP2.5m
(2020: GBP3.1m). There were no additions to non-current assets in
respect of Europe (2020: GBPnil) or the Asia Pacific region (2020:
GBPnil). The value of non-current assets in the USA was GBP48.1m
(2020: GBP44.7m) and in the United Kingdom GBP47.8m (2020:
GBP39.3m). There were no non-current assets in Europe or the
Asia-Pacific region.
2021 2020
GBP000 GBP000
-------- --------
United Kingdom 31,339 33,994
North America 45,915 45,554
Continental Europe 23,383 24,101
Asia Pacific and
Other 23,437 18,446
Total revenue 124,074 122,095
-------- --------
3. Income tax expense
Analysis of tax charge in the year
2021 2020
GBP000 GBP000
Current taxation
UK Corporation tax 722 1,089
Overseas tax 292 631
Adjustments in respect of prior
years (807) (199)
-------- --------
Total current tax 207 1,521
-------- --------
Deferred tax
Origination and reversal of temporary
differences 1 (255)
Adjustments in respect of prior
years 549 199
Change to UK tax rate 519 145
Total deferred tax 1,069 89
Income tax expense per income
statement 1,276 1,610
-------- --------
4. Non-underlying items
2021 2020
GBP000 GBP000
-------- --------
Included within administration
expenses
Amortisation of acquired intangible
assets 2,081 2,676
Restructuring costs 5,860 2,609
Property litigation settlement - (410)
7,941 4,875
-------- --------
Included within net finance costs
Interest awarded in property litigation
settlement - (818)
Unwind of discount on deferred
consideration - 303
- (515)
-------- ------
Included within taxation
Tax effect of the non-underlying
items above (1,611) (518)
Restatement of UK deferred tax 518 -
balances at 25%
-------- ------
(1,092) (518)
-------- ------
The restructuring costs incurred in the year 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.
The UK deferred tax balances on timing differences expected to
reverse after 1 April 2023 have been restated at 25%. This gave
rise to a non-underlying income statement charge of GBP0.5m.
Restructuring costs incurred in the year ended 30 September 2020
related to expenses arising from the project to establish the
Ilminster facility as our UK Precision Optics Centre of Excellence
and the resultant closure of our Glenrothes facility. The costs
recorded in the period principally comprised redundancy costs and
the write downs of both property, plant and equipment and
inventories of products which will be discontinued at the
completion of the project.
In March 2020 litigation with the landlord of our Fremont
facility was finally concluded. G&H was awarded a total of
$3.6m (GBP2.8m) comprising damages, reimbursement of our costs and
interest arising from the landlord's non-performance in respect of
the lease and this amount was received in June 2020. The
reimbursement of costs and interest received of GBP1.2m were
treated as a non-underlying credit in the income statement whilst
the damages element of the award were credited against the right of
use asset held on the balance sheet.
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:
2021 2020
Number of shares used for basic earnings
per share 25,040,919 25,039,519
Dilutive shares 239,603 174,664
Number of shares used for dilutive
earnings per share 25,280,522 25,214,183
----------- -----------
A reconciliation of the earnings used in the earnings per share
calculation is set out below:
2021 2020
pence pence
GBP000 per share GBP000 per share
------- ----------- ------- -----------
Basic earnings per share 3,404 13.6p 3,782 15.1p
Amortisation of acquired intangible
assets (net of tax) 1,621 6.5p 2,279 9.1p
Restructuring costs (net of
tax) 4,709 18.8p 2,218 8.9p
Interest on deferred consideration - - 303 1.2p
Property litigation settlement
(net of tax) - - (958) (3.8p)
Restatement of UK deferred
tax 519 2.1p - -
------- ----------- ------- -----------
Total adjustments net of income
tax expense 6,849 27.4p 3,842 15.4p
------- ----------- ------- -----------
Adjusted basic earnings per
share 10,253 41.0p 7,624 30.5p
------- ----------- ------- -----------
Basic diluted earnings per
share 3,404 13.5p 3,782 15.0p
------- ----------- ------- -----------
Adjusted diluted earnings
per share 10,253 40.5p 7,624 30.2p
------- ----------- ------- -----------
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.
6. Dividends
2021 2020
GBP000 GBP000
-------- --------
Final 2020 dividend: nil (Final 2019
dividend paid in 2020: 7.2p per share) - 1,803
2021 Interim dividend of 4.5p (2020: 1,127 -
nil)
-------- --------
1,127 1,803
-------- --------
The Directors have proposed a final dividend of 7.7p per share
making the total dividend paid and proposed in respect of the 2021
financial year nil. (2020: nil).
7. Cash generated from operating activities
Reconciliation of cash generated
from operations
2021 2020
GBP000 GBP000
-------- --------
Profit before income tax 4,680 5,392
Adjustments for:
- Amortisation of acquired intangible
assets 2,081 2,676
- Amortisation of other intangible
assets 1,275 984
- Loss/(profit) on disposal of
property, plant and equipment 95 (27)
- Depreciation 7,030 6,901
- Share based payment charge 735 303
- Amounts claimed under the RDEC (280) (315)
- Finance income (1) (834)
- Finance costs 722 1,776
-------- --------
Total 11,657 11,464
Changes in working capital
- Inventories 1,888 2,042
- Trade and other receivables (2,655) 6,812
- Trade and other payables 1,252 (4,149)
Total 485 4,705
Cash generated from operating activities 16,822 21,561
-------- --------
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END
FR FLFVTLFLAFIL
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