Soaring demand for reliable, flexible and cheap fibre-optic lasers easily offset a softening Chinese microelectronics market for Gooch & Housego (GHH). That trend, which underpins management's plans to diversify the business away from more cyclical areas, yielded double-digit revenue and profit growth in the year to September.
The shift away from more economically sensitive industrial sectors required a 14 per cent increase in research and development spending to £6.4m. Other investments included the hiring of experienced business development staff in aerospace and defence - a move that boss Mark Webster says dramatically improved the group's ability to leverage its technology. Similar measures will be applied to the other identified growth business, life sciences, in the year ahead.
Those investments, coupled with the closure of a manufacturing site in Melbourne, the upgrade of one in Cleveland and the relocation of a third factory to a bigger, lower-cost alternative nearby, brought the adjusted operating margin down 50 basis points to 16.6 per cent. But lower working capital outflows and tax payments helped nearly double the group's cash pile. Mr Webster hinted that these funds could be used to acquire companies, in line with his strategy of moving up the value chain.
Analysts at Investec Securities are forecasting normalised pre-tax profit of £13.5m and EPS of 40p for the year to 30 September 2016 (up from £12.9m and 38.9p in FY2015).
| GOOCH & HOUSEGO (GHH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 881p | MARKET VALUE: | £212m | |
| TOUCH: | 883-905p | 12-MONTH HIGH: | 935p | LOW: 650p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 325p* | NET CASH: | £17.3m | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 61.0 | 8.81 | 35.5 | 5.0 |
| 2012 | 60.9 | 7.08 | 24.4 | 5.2 |
| 2013 | 63.3 | 8.34 | 27.7 | 6.3 |
| 2014 | 70.1 | 7.88 | 22.5 | 7.2 |
| 2015 | 78.7 | 10.11 | 30.9 | 8.2 |
| % change | +12 | +28 | +37 | +14 |
Ex-div: 17 Dec Payment: 3 Mar *Includes intangible assets of £20.2m, or 84p a share | ||||
