Gooch & Housego optimistic after revenue, profit slips

The AIM-traded firm said its first-half order intake for the six months ended 31 March was 1.42 times revenue.

Financially, however, the company reported a 7.4% decline in revenue to £54.1m, and a 26.6% slide in adjusted profit before tax to £3.6m.

The board said the fall in adjusted profit was due to lower volumes, and investments made in research and development, as well as manufacturing capacity.

Adjusted basic earnings per share were 3.9% lower at 11.8p.

The board declared an interim dividend of 4.7p per share, up from the 4.5p distribution it made at the half-year last year.

Operationally, the company reported “strong and sustained” demand in its main target markets, with high demand for industrial lasers, in particular from semiconductors.

Gooch said it had increased its market share in a growing market, with medical lasers continuing to benefit from the return of elective surgery.

Aerospace and defence, meanwhile, was affected by “customer-driven delays” and new programmes not yet progressing to the volume phase.

Recent order intake in the sector was “strong”, however, including the £4m upgrade of the optical imaging system for the UK Ministry of Defence Challenger upgrade programme.

Revenue was constrained by pandemic-related factors, the directors explained, with Covid-related staff absences impacting its US and UK sites, as well as supply chain shortages.

“Substantial” investment was made to increase capacity, and the firm reported “good progress” with the recruitment of operators and securing its supply chain.

Gooch & Housego said the group remained in a strong financial position, with a new five-year revolving credit facility of a committed $40m and an uncommitted $30m put in place in March.

The board said there was a “clear route” to “mid-teens returns” in the near-term, through organic growth, internal investment and its “well-established” acquisition strategy.

“During the first half of the financial year there has been strong demand for the group's technologies and capabilities and our order book has achieved another record level,” said chief executive officer Mark Webster.

“However, in common with many industrial businesses, revenue was constrained by Covid-related staff absences and supply chain disruption.

“We have made substantial investment to increase production capacity in areas where there has been strong demand, primarily through the hiring and training of new operators and building resilience within our supply chain.”

Webster said cases of Covid-19 had “fallen markedly” since the second quarter, with absences returning to normal levels.

As a result, the company expected trading levels to accelerate in the second half.

"The company remains committed to our long term strategic goals of diversification and moving up the value chain.

“We intend to vigorously pursue these goals through internal investment and where appropriate acquisitions.

“Full year expectations are unchanged and the long-term outlook for our technologies and capabilities in all our target sectors remains very strong.”

At 1220 BST, shares in Gooch & Housego were up 5.42% at 901.32p.

Reporting by Josh White at Sharecast.com.