Gooch & Housego upbeat on trading despite 'challenging' laser market

The AIM-traded firm, which was holding its annual general meeting later in the day, said a “challenging” macroeconomic environment for its industrial laser sector was contrasting with high levels of demand for fibre optics, high-reliability fibre couplers used in undersea cables and its aerospace and defence and life science capabilities.

Technical innovation in industrial laser end markets and new laser-based manufacturing techniques were expected to ultimately drive improved demand, the board said.

Some industrial laser sub-sectors, such as semiconductors, had started to show signs of improvement.

The impact of the coronavirus outbreak was difficult to quantify at the current stage, Gooch said, given factories in China were only now just reopening after an extended Lunar New Year holiday, but it could act as a “drag” on the sector's short term performance.

“The company's high-reliability fibre coupler business has a full order book for the current financial year and we are looking at ways of increasing capacity still further for the 2021 financial year,” the Gooch & Housego board said.

“Our aerospace and defence business is reaping the benefits of the investment made last year to accommodate new US aerospace and defence contracts.

“Life sciences continues to perform strongly, in particular our ITL business, acquired in August 2018.”

Overall, Gooch said it expected to show progress on last year's result, adding that it would continue to monitor the potential impact of the coronavirus on its industrial laser products.

As at 31 January, the firm’s order book stood at £94.1m, which was an increase of 3.0% over the same period last year.

“Our longstanding strategy is to diversify our business and move up the value chain, [and] we continue to make considerable progress on both these counts.

“Aerospace and defence represents around a third of our revenue and life sciences continues to grow strongly, now representing over 20%.

“Systems or sub system products now represent over a third of our revenue, boosted by the systems engineering capability acquired with ITL.”

Gooch & Housego said it remained committed to investing in manufacturing cost reduction programmes, increasing high-reliability fibre coupler capacity, aerospace and defence, life science and systems capability and high return research and development projects.

The company said it remained in a “strong” financial position, which would allow it to continue to make further organic and acquisitive investment in line with its strategic objectives.

“Trading in the first four months reflects a challenging macro-economic environment for industrial lasers, contrasting with high levels of demand for fibre optics, high-reliability fibre couplers for undersea cables and our A&D and life science capabilities,” said chief executive officer Mark Webster.

“Technical innovation, such as 5G and new laser-based industrial manufacturing techniques will ultimately drive improved demand in the industrial laser sector.”

Webster said the company remained confident in the long-term growth potential for its chosen photonic technologies in all of its target sectors.

“G&H will continue to pursue further progress on our long term goals of greater diversification and moving up the value chain.”

At 1043 GMT, shares in Gooch & Housego were up 6.52% at 1,363.44p.