It can pay to be patient. A year ago Gooch & Housego's (G&H) shares were on the floor after profits collapsed due to customers destocking and orders for the company's core Q-switches were delayed. Q-switches are used to control lasers in electronics manufacturing and, one year on, demand is recovering fast. Add in a combination of declining operating costs and more than halved interest charges and, suddenly, G&H is back in growth mode.
In the first half, adjusted operating profits rose by almost two-thirds to £2.6m as Q-switch demand returned back to historic levels. The first quarter benefited from strong demand from China, followed by a pick up in US orders in the second quarter. That trend has continued as Euroland moves slowly into recovery mode. At the same time there are now important contributions from new markets such as defence (including imaging systems for smart weapons) and life sciences (high-resolution images of the retina).
Reflecting the strong order book, Investec Securities expects full-year reported pre-tax profits to race ahead from £1.4m last year to £3.7m and a rise in EPS from 5p to 13p.
GOOCH & HOUSEGO (GHH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 203.5p | MARKET VALUE: | £39.2m | |
| TOUCH: | 200-207p | 12-MONTH HIGH: | 210p | LOW: 68p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 169p* | NET DEBT: | 29% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 18.8 | 0.04 | 0.1 | nil |
| 2010 | 20.4 | 1.71 | 6.1 | nil |
| % change | +8 | - | - | -100 |
Aim: Electrical equipment *Includes intangible assets of £16.8m, or 87p a share | ||||
