Gooch & Housego (G&H)’s shares jumped almost 7 per cent as the company reported a 78 per cent increase in full-year adjusted pre-tax profits and the board raised the dividend 150 per cent.
The company's industrial division has seen “unprecedented demand” for its Q-switches from laser customers who produce sophisticated consumer goods such as Far East-made smart phones, tablets and flat-screen televisions. Revenues from this segment soared 55 per cent to £38.6m which drove operating profits up from £5.3m to £9.6m. However, management does not have to be told about the risk to this business as a combination of customer destocking and delayed orders sent profits in 2008-09 spinning downwards. So, wisely, G&H is diversifying and paid £15.9m for two US fibre-optic businesses, largely financed by a placing in January. They contributed maiden sales of £10.35m and profits of £1.59m to the latest results.
But the future does not look so bright. The company admits that last quarter demand was softer in the main industrial division and, on a like-for-like basis, group order books at end-September were down 16 per cent. To ease alarms about another shopping spree to combat weaker demand, G&H says it’s unlikely to make “further major acquisitions in the short to medium term.”
Broker Investec Securities forecasts normalised profits a tad lower at £10.4m.
GOOCH & HOUSEGO (GHH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 392p | MARKET VALUE: | £85.7m | |
| TOUCH: | 375-400p | 12-MONTH HIGH: | 610p | LOW: 320p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 248p* | NET DEBT: | 3% | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 30.7 | 6.64 | 26.8 | 4.5 |
| 2008 | 33.4 | 5.14 | 18.5 | 4.5 |
| 2009 | 36.4 | 1.42 | 5.0 | nil |
| 2010 | 44.7 | 5.10 | 24.4 | 2.0 |
| 2011 | 61.0 | 8.81 | 35.5 | 5.0 |
| % change | +36 | +73 | +45 | +150 |
Ex-div: 25 Jan Payment: 2 Mar *Includes intangible assets of £22.1m, or 101p a share Aim: electronic & electrical equipment | ||||
