These interim figures from optical components specialist Gooch & Housego (GHH) verify that management’s plan to diversify the business is working. Instead of providing industrial customers with individual specialist parts needed to build things like fibre optic systems, chief executive Gareth Jones wants Gooch to "move up the value chain" by supplying integrated subsystems that are easier to install. With the help of targeted acquisitions, the company is also pushing into new, higher-growth markets such as aerospace and life sciences.
The change in strategy seems to have been effective. Group-wide revenues climbed 10 per cent in the period on an organic, constant-currency basis. Moreover, two small acquisitions helped sales in the aerospace and defence division climb 37 per cent. Over the past five years, the division has grown at a compound annual rate of 50 per cent.
This increase in turnover dropped through to the bottom line, too: adjusted profit before tax rose 34 per cent to £5.1m. However, one-off site closure costs and goodwill impairments resulted in flat basic EPS. After acquiring several small businesses over the years, Gooch is now left with too many manufacturing bases and has begun to close down surplus facilities.
Broker finnCap expects adjusted pre-tax profit of £11.6m in the current year, giving adjusted EPS of 35.7p, up from £9.7m and 30.5p last year.
GOOCH & HOUSEGO (GHH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 665p | MARKET VALUE: | £158m | |
| TOUCH: | 651-670p | 12-MONTH HIGH: | 740p | LOW: 470p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 280p* | NET CASH: | £2.3m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 29.0 | 3.3 | 11.2 | 2.3 |
| 2014 | 34.4 | 3.7 | 11.0 | 2.6 |
| % change | +19 | +12 | -2 | +13 |
Ex-div: 25 Jun Payment: 21 Jul *Includes intangible assets of £21m, or 87p a share | ||||
