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Order surge at Gooch & Housego

The light science specialist is driving margins while expanding its proprietary offering
November 29, 2017

In June, we exited our buy call on Gooch & Housego (GHH) when it was 42 per cent to the good. The move certainly didn’t reflect diminished faith in the group’s long-term prospects, but simply that strengthening investor support had driven valuations for the photonics (light sciences) specialist to equitable levels. That support seems wholly justified, as full-year sales have eclipsed the £100m mark for the first time, representing an 18.7 per cent increase at constant currencies.

IC TIP: Hold at 1,460p

That pushed adjusted pre-tax profit up 13.7 per cent to £16.1m. The industrial segment's revenue share declined proportionately, but it still added £64.3m to the top line, an 18 per cent advance on the 2016 financial year. The business is benefiting from rising demand for precision lasers used in micro-electronics manufacturing, particularly in telecommunications and sub-sea applications, evidenced by a 36.5 per cent increase in the group order book to £72.1m at the period-end.

There was also an improved showing from the aerospace and defence segment on the back of contributions from Kent Periscopes and Alfalight, acquired last year, together with a better-then-expected performance from StingRay Optics, which delivered £5.3m in sales even though it was only acquired in February. More importantly, the integration of new additions has helped to bolster the divisional operating margin.

Investec gives adjusted pre-tax profit of £18.4m for the September 2018 year-end, giving EPS of 52.9p, against £16.1m and 48.5p in FY2017.

GOOCH & HOUSEGO (GHH)  
ORD PRICE:1,460pMARKET VALUE:£358m
TOUCH:1,436-1,470p12-MONTH HIGH:1,463pLOW: 950p
DIVIDEND YIELD:0.7%PE RATIO:40
NET ASSET VALUE:401p*NET CASH:£14.9m
Year to    TurnoverPre-taxEarnings Dividend
30 Sep (£m) profit (£m)per share (p) per share (p)
201363.38.327.76.3
201470.17.922.57.2
201578.710.130.98.2
201686.110.129.19.0
201711212.636.410.2
% change+30+25+25+13
Ex-div:25 Jan   
Payment:02 Mar   
*Includes intangible assets of £40.3m, or 164p a share.