Interim Report

RNS Number : 7062G

Gooch & Housego PLC

11 June 2013

 



For immediate release

11 June 2013

Gooch & Housego PLC

INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2013

Gooch & Housego PLC ('G&H' or 'the Company'), the specialist manufacturer of optical components and systems, today announces its interim results for the six months ended 31 March 2013.

Financial highlights	H1 2013	H1 2012	Increase	FY 2012
Revenue	£29.0m	£27.8m	4 %	£60.9m
Adjusted profit before tax1	£3.8m	£3.0m	27%	£8.2m
Adjusted earnings per share1	12.7p	10.5p	21%	28.2p
Reported profit before tax	£3.3m	£2.5m	32%	£7.1m
Basic earnings per share	11.2p	8.7p	29%	24.4p
Net cash/(debt) at period end	£0.7m	(£5.6)m	113%	(£0.3)m

¹ Adjusted for amortisation of acquired intangible assets.

Operational highlights

·      Strong order book, underpinned by significant Aerospace and Defence order wins

·      Net cash position as at 31 March 2013

·      Established Systems Technology Group to accelerate the move up the value chain

·      Exciting opportunities and strong pipeline in Space Photonics

·      New Gooch & Housego subsidiary established in Japan and sales presence strengthened in Asia

·      Interim dividend of 2.3p per share declared

Gareth Jones, Chief Executive of Gooch & Housego PLC, commented on the results:

"Against a backdrop of continuing economic uncertainty, Gooch & Housego is focussing on delivering growth.

Despite the prevailing economic conditions I am pleased to report that Gooch & Housego has had a solid first half, reporting continued growth in revenue and profit.

We are on track and remain positive about achieving our strategic objectives to move up the value chain from components supplier to solutions provider and to deliver growth through the provision of innovative photonic solutions in specialised applications where we can take a leading or dominant position."

For further information please contact:

Gooch & Housego PLC	Gareth Jones / Andrew Boteler	01460 256 440
Buchanan	Tim Thompson	020 7466 5000
Investec Banking plc (Nomad & Broker)	Patrick Robb	020 7597 5169

Operating and Financial Review

Performance Overview

Revenue for the six months ended 31 March 2013 was £29.0 million, up 4% from £27.8 million for the corresponding period last year. 

REVENUE
Six months ended 31 March	2013			2012
	£'000	% of total		£'000	% of total
Industrial	16,404	56%		16,882	61%
Aerospace and Defence	7,437	26%		6,754	24%
Life Sciences	3,142	11%		2,566	9%
Scientific Research	2,006	7%		1,598	6%
Group Revenue	28,989	100%		27,800	100%

The business has delivered profitable growth and improving margins whilst experiencing variable demand patterns within our core markets. The trend towards a more evenly balanced business has continued, reflecting our strategy of diversification and our efforts to develop new opportunities in Aerospace and Defence and Life Sciences.

In our industrial market, revenues were marginally lower than the corresponding period last year as a solid performance in our traditional industrial laser market was counteracted by poor demand from the telecommunications and semiconductor sectors.

Aerospace and Defence epitomised the mixed nature of trading.  In overall terms revenues were 10% higher in the current financial period driven by strong demand from our European customers. In contrast, budgetary constraints in the US, have delayed decisions on the award of new contracts.

In life sciences an excellent overall performance, with growth of 22%, was achieved through strong sales into the medical laser market, but again this was achieved against a head wind of poorer sales in retinal imaging.

Order intake in the first half of the year has been strong.  The order book at 31 March 2013 was £29.6 million and the Company has booked £32 million in orders since 1 October 2012.  As a result, the order book going into the second half of financial year 2013 is £5 million higher than the corresponding level last year.

Profit before tax was £3.3 million, 33% better than the £2.5 million reported last year. This reflects the improved trading conditions in our core industrial laser market, as well the overall increased volume in our Aerospace and Defence business, which has driven some benefits in the operational gearing of this segment.

Operational and Strategy Review

Products and Markets - Industrial

Gooch & Housego's principal industrial markets are industrial lasers, telecommunications, metrology/sensing and semiconductor manufacturing. Industrial lasers are used in a diverse range of precision material processing applications ranging from microelectronics to automotive.

Business in our industrial laser market was solid in the first six months of the year, underpinned by steady demand for our traditional acousto-optic Q-switched products, sales of which were 16% higher than the corresponding period last year.

Whilst precision optics was our best performing product sector during the period in question, this was largely due to increased demand from the Aerospace and Defence market. The principal industrial applications for the Company's precision optics products arelaser-based metrology where sales remained flat, and  semiconductor manufacturing and inspection equipment, where sales decreased, reflecting the current downturn in that cyclical market.

In telecommunications demand for our products was again adversely affected by delays to large scale undersea cable infrastructure projects as a result of uncertainties over funding. This market has recently shown signs of recovery.

The Fibre-Q switch continues to be an exciting new product for Gooch & Housego.  This is a key enabling technology in fibre-optic sensing applications and we are closely engaged with a number of customers to design the Fibre-Q into the next generation of their systems. 

The fibre-laser market continues to be a growing subset of the industrial laser market.  Increasingly, fibre-laser manufacturers are turning to Q-switching for their latest laser designs, which plays to Gooch & Housego's strengths. Our Q-switch and Fibre-Q products, have both experienced growth in the first half of the year.

Products and Markets - Aerospace and Defence

The Aerospace and Defence market for Gooch & Housego is characterised by high-value, long-term programmes involving the main US and European defence contractors.  During the first six months of 2013 the Company has seen a healthy increase in its Aerospace and Defence business, with a significant proportion of revenues coming from sub-assemblies for the first time.  Gooch & Housego continues to regard Aerospace and Defence as a growth market and we are investing accordingly.   Particular emphasis has been placed on our defence orientated quality systems.  Earlier this year our Ilminster manufacturing facility gained BS/EN9100 accreditation and as a result will be listed on the International Aerospace Quality Group (IAQG) Online Aerospace Supplier Information System (OASIS) supplier database. The same facility also recently re-qualified as a SC21 Bronze award holder. (SC21 is an Aerospace, Defence, Security and Space industry initiative to increase the competitiveness of UK industry through supply chain improvement.) Taken together this means that Gooch & Housego is now in a position to supply airframe and avionic manufacturers in the civil, defence and space sectors with optical components and sub-systems for both R&D and production.

During the past six months, Space Photonics has emerged as a significant new application area in which Gooch & Housego has the opportunity to develop a market leading position by leveraging its unique expertise in fibre optics, semiconductor lasers and precision optics. These skills are particularly sought after in the rapidly evolving field of satellite laser communications, guidance and control systems. With support and encouragement from UK, European and US space agencies, Gooch & Housego has successfully bid on several development programmes, and has more in the pipeline. Our recently established Systems Technology Group (STG) has been instrumental in realising these opportunities, which are focussed on the application of our core component technologies in complex sub-systems as we seek to move up the value chain. This is consistent with our strategy of delivering growth by migrating from component supplier to solutions provider at the systems level. We expect Space Photonics to become an increasingly important sub-set of the Aerospace & Defence market.

Products and Markets - Life Sciences

Our three principal Life Sciences revenue streams are derived from - diagnostics (fibre-optic modules for optical coherence tomography (OCT) applications), surgery (Q-switches for surgical lasers) biomedical research (acousto-optics for microscopy applications). In each application area we are making steady progress in moving up the value chain and we are currently selling sub-systems as well as components to several of our larger customers. In addition to our commercial activities we are also investing in the development of diagnostic systems based on hyperspectral imaging technology.

Overall, this sector has shown robust growth, although as with most of our markets over the last six months, trading conditions have been mixed with certain areas performing better than others.

The principal commercial application of OCT systems is retinal imaging, and Gooch & Housego continues to be the leading provider of fibre optic solutions (products and design services) to this industry. The softer demand patterns experienced by this industry were reflected in sales during the first half of the year. In contrast, sales of fibre-optic, acousto-optic and electro-optic components for applications in the medical laser market has been strong, resulting in an overall year-on-year growth of 22% in this market.

Products and Markets - Scientific Research

The principal application in Scientific Research is laser inertial confinement fusion ("laser fusion"), where lasers are used to create the conditions found in the core of a star. In addition to pure research in high energy and plasma physics, these vast laser systems are being used to investigate whether this technology could provide clean, carbon-free energy to lessen the mankind's dependency on fossil fuels. Gooch & Housego is already looking into the practical and financial implications of scaling the manufacture of the critical optical components to meet the needs of an electrical power generating industry based on this technology.

Strategy

Gooch & Housego has developed, and measures itself on a set of strategies to deliver long term, sustainable growth for its shareholders.  These can be categorised into two broad pillars: "Diversification" and, "Moving up the Value Chain".  In seeking to achieve its strategic goals Gooch & Housego uses a variety of tools, including investment in R&D to deliver organic growth, acquisitions, market focused business development and strategic partnerships.

In the first six months of the current financial year, Gooch & Housego invested £2.4 million in research and development.  This represents 8.3% of revenue and is 16% higher than the same period last year.

As the Company moves up the value chain, know-how and trade secrets no longer provide adequate protection. As a result, protecting intellectual property by means of patents is becoming increasingly important. Gooch & Housego has an Intellectual Property Committee, comprising senior R&D and management personnel and chaired by the Chief Technology Officer, that meets on a quarterly basis and whose remit is to identify and protect commercially relevant intellectual property.  So far this year two patents have been granted and a further five inventions have been identified and patents are in the process of being filed.

Diversification :  Gooch & Housego seeks to develop, through R&D and acquisition, a presence in new markets that offer the potential for significant growth as a result of their adoption of photonic technology, whilst also reducing exposure to cyclicality in any particular sector.  In the current period Gooch & Housego has grown its business in its two key target markets of Aerospace and Defence and Life Sciences.  Moreover, the business has continued to invest in its quality systems and business development in order to strengthen its position in these markets in the future. We will continue to evaluate potential bolt-on acquisition opportunities to reinforce our market leading position in key product and technology sectors.

Moving up the Value Chain : Gooch & Housego seeks to move up the value chain to more complex sub-assemblies and systems through leveraging its excellence in materials and components, and by providing photonic design and engineering solutions for our customers.  With modules and sub-systems accounting for a growing proportion of orders, Gooch & Housego is progressively making the transition from components supplier to solutions provider.   The majority of our business in the Aerospace and Defence market now comes from the sale of sub-systems rather than discrete components.  In the last six months the Company has introduced a new initiative to accelerate this process organically with the formation of the Systems Technology Group (STG), which functions as a separate business, distinct from the existing manufacturing operations.  The STG provides design and engineering services and leads Gooch & Housego's participation in a number of funded research programmes.  Its initial focus has been on opportunities to take Gooch & Housego up the value-chain in the fields of Space Photonics and optical coherence tomography for biomedical imaging applications.

Cash Flow and Financing

In the six months to 31 March 2013 Gooch & Housego generated net cash from operations of £2.8 million, compared to £1.9 million in the same period of 2012. 

The Company has invested in working capital during the first six months of the year.  Working capital has increased by £2.6 million since the year end.

Capital expenditure on property, plant and equipment was £1.0 million in the period (2012: £2.5 million). In 2012 the level of capital expenditure was higher due to the crystal growth consolidation and fibre optic technology replication programmes.

Cash, cash equivalents and bank overdrafts as at 31 March 2013 amounted to a positive cash position of £9.0 million, compared to £9.2 million at 30 September 2012.

Since 30 September 2012, the Company has moved from a net debt position of £0.3 million to a net cash position of £0.7 million.  The movement in net debt is outlined in the table below.

MOVEMENT IN NET CASH
All amounts in £m	Gross cash	Gross debt	Net cash
At 1 October 2012	11.7	(12.0)	(0.3)
Net cash flows from trading	5.4	-	5.4
Debt repayments	(1.7)	1.7	-
Proceeds from share issues	0.5	-	0.5
Capital Expenditure	(1.0)	-	(1.0)
Working capital	(2.6)	-	(2.6)
Interest and dividends	(1.0)	-	(1.0)
Foreign exchange	0.4	(0.7)	(0.3)
At 31 March 2013	11.7	(11.0)	0.7

At 31 March 2013, the banking facilities for Gooch & Housego with its bankers, the Royal Bank of Scotland, comprise of an $18 million dollar denominated term loan (of which $9.0 million is still outstanding), a £3.1 million sterling denominated term loan (of which £2.2 million is still outstanding), an $8 million revolving credit facility (drawn to $4 million as at 31 March 2013) and an undrawn capital expenditure facility of $8 million.  All facilities are committed until April 2015, subject to certain covenant provisions.

Staff

The Company workforce fell from 588 at 30 September 2012 to 579 at the end of March 2013, a fall of 9.  This is a net fall and reflects both the reductions in staffing resulting from the rebalancing of capacity at some locations and the additional investment that the business has made in engineering. 

Dividends

The Directors have declared an interim dividend of 2.3p per share (2012 : 2.0p per share).  This will be payable on 26 July 2013 to shareholders on the register as at 21 June 2013.

Prospects

Gooch & Housego's markets continue to exhibit attractive, long-term structural growth drivers as photonic technology is adopted across an increasingly wide range of application areas  Despite continuing global economic uncertainties and short-term fluctuations in activity levels, we continue to invest in our business with confidence to position it for sustainable long-term growth.

Julian Blogh                Gareth Jones                           Andrew Boteler                      

Chairman                     Chief Executive Officer            Chief Financial Officer            

11 June 2013                11 June 2013                            11 June 2013

Unaudited interim results for the 6 months ended 31 March 2013

Group Income Statement	Note	Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
		£'000	£'000	£'000
Revenue	5	28,989	27,800	60,851
Cost of revenue		(17,674)	(17,477)	(37,405)
Gross profit		11,315	10,323	23,446
Research and Development		(2,423)	(2,089)	(4,277)
Sales and Marketing		(2,218)	(2,019)	(4,119)
Administration and other expenses		(4,078)	(3,826)	(8,181)
Other income		1,047	527	983
Operating profit	5	3,643	2,916	7,852
Net finance costs		(320)	(416)	(776)
Profit before income tax expense		3,323	2,500	7,076
Income tax expense	6	(841)	(603)	(1,753)
Profit for the period		2,482	1,897	5,323
Earnings per share	7	11.2p	8.7p	24.4p

Reconciliation of operating profit to adjusted operating profit:

		Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to       30 Sep 2012 (Audited)
		£'000	£'000	£'000
Operating profit		3,643	2,916	7,852
Amortisation of acquired intangible assets		427	457	881
Restructuring costs		-	55	240
Adjusted operating profit		4,070	3,428	8,973

Group Statement of Comprehensive Income	Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to       30 Sep 2012 (Audited)
	£'000	£'000	£'000
Profit for the period	2,482	1,897	5,323
Other comprehensive income
Fair value adjustment of interest rate swap net of tax	42	62	95 (1,084)
Currency translation difference	1,058	(689)	(1,084)
Other comprehensive income/(expense) for the period	1,100	(627)	(989)
Total comprehensive income for the period	3,582	1,270	4,334

Unaudited interim results for the 6 months ended 31 March 2013

Group Balance Sheet		31 Mar 2013 (Unaudited)	31 Mar 2012 (Unaudited)	30 Sep 2012 (Audited)
		£'000	£'000	£'000
Non-current assets
Property, plant and equipment		21,523	21,493	21,405
Intangible assets		21,130	21,410	20,720
Deferred income tax assets		4,203	4,223	4,308
		46,856	47,126	46,433
Current assets
Trade and other receivables		13,515	9,632	11,062
Inventories		14,188	13,845	12,802
Cash and cash equivalents		11,672	8,201	11,712
		39,375	31,678	35,576
Current liabilities
Borrowings		(6,082)	(5,859)	(10,202)
Trade and other payables		(10,569)	(8,317)	(5,774)
Income tax liabilities		(841)	(330)	(17)
Provision for other liabilities and charges		(324)	(358)	(357)
		(17,816)	(14,864)	(16,350)
Net current assets		21,559	16,814	19,226
Non-current liabilities
Borrowings		(4,879)	(7,896)	(6,261)
Deferred income tax liabilities		(618)	(648)	(698)
Derivative financial instruments		(83)	(177)	(134)
		(5,580)	(8,721)	(7,093)
Net assets		62,835	55,219	58,566
Shareholders' equity
Called up share capital		4,491	4,372	4,382
Share premium account		14,757	14,211	14,311
Merger reserve		2,671	2,671	2,671
Hedging reserve		(128)	(202)	(169)
Cumulative translation reserve		1,347	(101)	(496)
Retained earnings		39,697	34,268	37,867
Equity Shareholders' Funds		62,835	55,219	58,566

Unaudited interim results for the 6 months ended 31 March 2013

Statement of Changes in Equity	Share capital account £000	Share premium account £000	Merger reserve £000	Hedging reserve £000	Retained earnings £000	Total equity £000
At 1 October 2011	4,370	14,200	2,671	(264)	33,123	54,100
Profit for the period	-	-	-	-	1,897	1,897
Other comprehensive income for the year	-	-	-	62	(689)	(627)
Total comprehensive income for the year	-	-	-	62	1,208	1,270
Dividends	-	-	-	-	(656)	(656)
Proceeds from shares issued	2	11	-	-	-	13
Fair value of employee services	-	-	-	-	235	235
Tax credit relating to share option schemes	-	-	-	-	257	257
	2	11	-	-	(164)	(151)
At 31 March 2012 (unaudited)	4,372	14,211	2,671	(202)	34,167	55,219
At 1 October 2012	4,382	14,311	2,671	(169)	37,371	58,566
Profit for the period	-	-	-	-	2,482	2,482
Other comprehensive income for the year	-	-	-	41	1,841	1,882
Total comprehensive income for the year	-	-	-	41	4,323	4,364
Dividends	-	-	-	-	(712)	(712)
Proceeds from shares issued	76	446	-	-	-	522
Fair value of employee services	-	-	-	-	235	235
Tax credit relating to share option schemes	-	-	-	-	(140)	(140)
Grant of nil cost share options	33	-	-	-	(33)	-
	109	446	-	-	(650)	(95)
At 31 March 2013 (unaudited)	4,491	14,757	2,671	(128)	41,044	62,835

Unaudited interim results for the 6 months ended 31 March 2013

Group Cash Flow Statement		Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
		£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations		2,794	2,727	10,653
Income tax paid		(53)	(831)	(1,793)
Net cash generated from operating activities		2,741	1,896	8,860
Cash flows from investing activities
Acquisition of subsidiaries		(20)	(2,068)	(2,061)
Purchase of property, plant and equipment		(896)	(2,457)	(3,337)
Sale of property, plant and equipment		-	59	59
Purchase of intangible assets		(56)	(264)	(405)
Interest received		6	20	24
Net cash used in investing activities		(966)	(4,710)	(5,720)
Cash flows from financing activities
Repayment of borrowings		(1,694)	(1,704)	(3,397)
Proceeds from issues of share capital		522	47	123
Dividends paid to ordinary shareholders		(712)	(656)	(1,093)
Interest paid		(269)	(411)	(711)
Net cash (used in)/generated  from financing activities		(2,153)	(2,724)	5,078
Net decrease in cash, cash equivalents and revolving credit facility		(378)	(5,538)	(1,938)
Cash, cash equivalents and revolving credit facility at beginning of the period		9,235	11,276	11,276
Exchange gains/(losses) on cash and revolving credit facility		180	(40)	(103)
Cash, cash equivalents and revolving credit facility at the end of the period		9,037	5,698	9,235

Cash, cash equivalents and revolving credit facility at the end of the period are made up of:

		Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
		£'000	£'000	£'000
Cash and cash equivalents		11,672	8,201	11,712
Revolving credit facility		(2,635)	(2,503)	(2,477)
Cash, cash equivalents and revolving credit facility at the end of the period		9,037	5,698	9,235

Notes to the Group Cash Flow Statement		Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
		£'000	£'000	£'000
Profit before income tax		3,323	2,500	7,076
Adjustments for:
- Amortisation of acquired intangible assets		427	457	881
- Amortisation of other intangible assets		84	154	296
- Depreciation		1,042	995	2,092
- Profit/(Loss) on disposal of property, plant    and equipment		-	(19)	48
- Share based payment obligations		235	235	471
- Finance income		(6)	(20)	(24)
- Finance costs		326	436	800
Total adjustments		2,108	2,238	4,564
Changes in working capital
- Inventories		(786)	(2,860)	(1,465)
- Trade and other receivables		(562)	1,684	1,351
- Trade and other payables		(1,189)	-	(327)
- Provisions for liabilities and charges		(100)	(835)	(546)
Total changes in working capital		(2,637)	(2,011)	(987)
Cash generated from operating activities		2,794	2,727	10,653

Reconciliation of net cash inflow to movements in net debt

		Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
		£'000	£'000	£'000
Decrease in cash in the period		(378)	(5,538)	(1,938)
Repayment of borrowings		1,694	1,704	3,397
Changes in net debt resulting from cash flows		1,316	(3,834)	1,459
Translation differences		(282)	133	71
Movement in net debt in the year		1,034	133	1,530
Net debt at start of period		(323)	(1,853)	(1,853)
Net cash/(debt) at end of period		711	(5,554)	(323)

Analysis of net debt

	At 1 Oct 2012	Cash flow	Exchange movement	Non-cash movement	At 31 Mar 2013
	£'000	£'000	£'000	£'000	£'000
Cash at bank and in hand	11,712	(378)	338	-	11,672
Revolving credit facility	(2,477)	-	(158)	-	(2,635)
	9,235	(378)	180	-	9,037
Debt due within 1 year	(3,264)	1,664	(179)	(1,664)	(3,443)
Debt due after 1 year	(6,261)	-	(282)	1,664	(4,879)
Finance leases	(33)	30	(1)	-	(4)
Net (debt)/cash	(323)	1,316	(282)	-	711

Notes to the Interim Report

1.      Basis of Preparation

The unaudited Interim Report has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union.

The Interim Report was approved by the Board of Directors and the Audit Committee on 11 June 2013.  The Interim Report does not constitute statutory financial statements within the meaning of the Companies Act 2006 and has not been audited.  

Comparative figures in the Interim Report for the year ended 30 September 2012 have been taken from the Group's audited statutory financial statements on which the Group's auditors, PricewaterhouseCoopers LLP, expressed an unqualified opinion.  The comparative figures to 31 March 2012 are unaudited.

The Interim Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 11 June 2013. Copies will be available to members of the public upon application to the Company Secretary at Dowlish Ford, Ilminster, Somerset, TA19 0PF.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2012, as described in those financial statements.

2.      Application of IFRS

Adoption of new standards

During the current reporting period there were no new standards or amendments which had a material impact on the net assets of the Group. In addition, standards or amendments issued but not yet effective are not expected to have a material impact on the net assets of the Group.  However, the Group is closely monitoring the IASB projects on Contract Revenue recognition and the Lease accounting overhaul as they could potentially have a material impact on the Group's results.

3.      Estimates

The preparation of interim financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 September 2012.

4.      Financial risk management

The Company's activities expose it to a variety of financial risks, market risk (including currency risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The interim condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements as at 30 September 2012.

There have been no changes to the risk management policies since the year end.

5.      Segmental analysis

	Aerospace & Defence	Life Sciences	Industrial	Scientific Research	Corporate	Total
For half year to 31 March 2013	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
Total revenue	7,437	3,142	18,430	2,006	-	31,015
Inter and intra-division	-	-	(2,026)	-	-	(2,026)
External revenue	7,437	3,142	16,404	2,006	-	28,989
Divisional expenses	(6,658)	(2,617)	(12,799)	(1,433)	(286)	(23,793)
EBITDA¹	779	525	3,605	573	(286)	5,196
EBITDA %	10.5%	16.7%	22.0%	28.6%	-	17.9%
Depreciation and Amortisation	(281)	(124)	(558)	(80)	(83)	(1,126)
Operating profit before amortisation of acquired intangible assets	498	401	3,047	493	(369)	4,070
Amortisation of acquired intangible assets	-	-	-	-	(427)	(427)
Operating profit	498	401	3,047	493	(796)	3,643
Operating profit margin %	6.7%	12.8%	18.6%	24.6%	-	12.6%
Operating profit excluding group cost sharing 1	970	471	3,352	263	(1,413)	3,643
Operating profit margin excluding group cost sharing %	13.0%	15.0%	20.4%	13.1%	-	12.6%
1 In 2013 Gooch & Housego introduced a new cost sharing regime for corporate expenditure. The 2013 Operating Profit has been stated excluding the effects of the group cost sharing for comparative purposes.
	Aerospace & Defence	Life Sciences	Industrial	Scientific Research	Corporate	Total
For half year to 31 March 2012	£'000	£'000	£'000	£'000	£'000	£'000
Revenue
Total revenue	6,754	2,566	18,533	1,598	-	29,451
Inter and intra-division	-	-	(1,651)	-	-	(1,651)
External revenue	6,754	2,566	16,882	1,598	-	27,800
Divisional expenses	(5,786)	(2,109)	(12,965)	(1,478)	(940)	(23,278)
EBITDA¹	968	457	3,917	120	(940)	4,522
EBITDA %	14.3%	17.8%	23.2%	7.5%	-	16.3%
Depreciation and Amortisation	(227)	(75)	(324)	(33)	(490)	(1,149)
Operating profit before amortisation of acquired intangible assets	741	382	3,593	87	(1,430)	3,373
Amortisation of acquired intangible assets	-	-	-	-	(457)	(457)
Operating profit	741	382	3,593	87	(1,887)	2,916
Operating profit margin %	11.0%	14.9%	21.3%	5.4%	-	10.5%

¹EBITDA = Earnings before interest, tax, depreciation and amortisation.

All of the amounts recorded are in respect of continuing operations.

5.      Segmental analysis continued

Analysis of revenue by destination

	Half year to 31 Mar 2013 (Unaudited)		Half year to 31 Mar 2012 (Unaudited)
	£'000		£'000
United Kingdom	4,093		4,419
America	12,940		13,186
Continental Europe	7,491		6,418
Asia-Pacific	4,465		3,777
	28,989		27,800

6.      Income tax expense

Analysis of tax charge in the period

		Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
		£'000	£'000	£'000
Current taxation
UK Corporation tax		740	501	1,264
Overseas tax		52	305	491
Adjustments in respect of prior year tax charge		86	(78)	(395)
Total current tax		878	728	1,360
Deferred tax
Origination and reversal of timing differences		(1)	(140)	32
Adjustments in respect of prior year deferred tax		(36)	(17)	307
Impact of tax rate change to 23% (2012: 23%)		-	31	54
Total deferred tax		(37)	(126)	393
Income tax expense per income statement		841	602	1,753

The tax charge for the six months ended 30 March 2013 is based on the estimated effective rate of the tax for the Group for the full year to 30 September 2013. The estimated rate is applied to the profit before tax.

7.      Earnings per share

The calculation of earnings per 20p Ordinary Share is based on the profit for the period using as a divisor the weighted average number of Ordinary Shares in issue during the period.  The weighted average number of shares is given below.

	Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
	No.	No.	No.
Number of shares used for basic earnings per share	22,123,658	21,858,175	21,860,241
Dilutive shares	1,652,880	1,280,393	1,531,993
Number of shares used for dilutive earnings per share	23,776,538	23,138,568	22,392,234

A reconciliation of the earnings used in the earnings per share calculation is set out below:

	Half Year to 31 Mar 2013 (Unaudited)		Half Year to 31 Mar 2012 (Unaudited)		Full Year to 30 Sep 2012 (Audited)
	£'000	p per share	£'000	p per share	£'000	p per share
Basic earnings per share	2,482	11.2p	1,897	8.7p	5,323	24.4p
Adjustments net of income tax expense:
Amortisation of acquired intangible assets (net of tax)	329	1.5p	347	1.6p	662	3.0p
Redundancy costs	-	-	42	0.2p	-	-
Restructuring costs	-	-	-	-	180	0.8p
Total adjustments net of income tax expense	329	1.5p	389	1.8p	(536)	3.8p
Adjusted basic earnings per share	2,811	12.7p	2,286	10.5p	8,059	28.2p

Basic diluted earnings per share	2,482	10.4p	1,897	8.2p	7,523	33.6p
Adjusted diluted earnings per share	2,811	11.8p	2,286	9.9p	8,059	36.0p

Adjusted earnings per share before amortisation and adjustments has been shown because, in the opinion of the Directors, it more accurately reflects the trading performance of the Group.  

8.      Dividend

The Directors have declared an interim dividend of 2.3 pence per share for the half year ending 31 March 2013.  This dividend has not been accounted for within the period to 31 March 2013 as it is yet to be paid.

	Half Year to 31 Mar 2013 (Unaudited)	Half Year to 31 Mar 2012 (Unaudited)	Full Year to 30 Sep 2012 (Audited)
	£'000	£'000	£'000
Final 2012 dividend paid : 3.2p per share	712	-	-
2012 Interim dividend paid : 2.0p per share	-	-	437
Final 2011 dividend paid in 2012 : 2.0p per share	-	656	656
	712	656	871

9.      Borrowings

The group's banking facilities with the Royal Bank of Scotland comprise of an $18 million dollar denominated term loan (fully drawn down), a £3.1 million sterling denominated term loan (fully drawn down).  The term loan balances at 31 March 2013 were $9 million and £2.2 million sterling respectively.

In addition, the Company has a revolving credit facility of $8.0 million of which $4.0 million is utilised and an undrawn capital expenditure facility of $8.0 million.

All facilities are committed until April 2015 and attract an interest rate of between 2.25% and 3.00% above LIBOR dependent upon the Company's leverage ratio.

10.     Called Up Share Capital

	2013 No.	2012 No.	2013 £'000	2012 £'000
Allotted, issued and fully paid Ordinary share of 20p each	22,456,965	21,850,798	4,491	4,382

11.     Derivative financial instruments

		Half Year to 31 Mar 2013  (Unaudited)	Half Year to 31 Mar 2012  (Unaudited)	Full Year to 30 Sep 2012 (Audited)
		£'000	£'000	£'000
Interest rate swap		166	265	223
Current liability portion		83	88	89
Non-current liability portion		83	177	134
		166	265	223

The notional principal amount of the outstanding interest swap contract at 31 March 2013 was $11.25 million (2012: $15.75 million).  The end date for the interest rate swap is 1 April 2015.  At 31 March 2013, the fixed rate of the interest rate swap was 2.14% and the floating rate was US dollar LIBOR. The fair value of the swap is a mark to market calculation based on future interest rate expectations over the life of the swap.  This is a level 2 method of determining fair value as defined by IFRS 7.

 

END

 

 

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