Gooch & Housego (G&H) has produced some impressive results for the six months to the end of March 2011. The profit increase was driven by the industrial section, which is the original and largest division, and manufactures products such as Q-switches, driving lasers to produce what it calls "fashion products" largely made in the Far East.
They include flatscreen televisions, smart phones and tablet computers. In the latest half-year that division increased sales from £12.3m to £16.8m, while operating profits jumped from £2.29m to £4.34m. A big help here was a 150 per cent increase in Q-switch capacity added over the past 15 months.
But demand for Q-switches - as for silicon chips - can fluctuate dramatically and sales are now slowing. So, in order not to be caught out again, as was the case when orders collapsed in 2008-09, the company is diversifying rapidly and particularly into aerospace and defence work. That division almost doubled half-year profits to £1.47m, but will soon account for a third of annualised sales following two recent US acquisitions leading to technology transfers. G&H has substantially reduced manufacturing lead times, but still sports a record order book of £32.7m at the end of March 2011.
So, not surprisingly, brokers are upgrading their full-year forecasts. Investec now expects 12 months' sales to rise from £44.7m to £60m, while normalised profits advance from £6m to £10m. On this basis, 2010-11 earnings increase from 22.5p to 32.4p.
GOOCH & HOUSEGO (GHH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 537.75p | MARKET VALUE: | £118m | |
| TOUCH: | 530.5-545p | 12-MONTH HIGH: | 582.5p | LOW: 178.5p |
| DIVIDEND YIELD: | 0.4% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 23p* | NET DEBT: | 11% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 20.4 | 1.71 | 6.1 | nil |
| 2011 | 27.2 | 3.94 | 13.0 | 2.0 |
| % change | +33 | +130 | +113 | - |
Ex-div:15 June Payment:15 July Aim:General engineering. *Includes intangible assets of £24.6m, or 11p a share. | ||||
