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Extra production capacity boosts G&H sales figures

07 Jun 2023

London-listed maker of optical components and subsystems reports a 32% rise in six-monthly revenues.

G&H (Gooch & Housego) has reported a sharp increase in sales for its latest half-year financial results, thanks to a combination of new production capacity and strong demand from the industrial laser and semiconductor markets.

The UK-headquartered manufacturer of optical components and systems posted sales of £71.3 million for the six months ending March 31, with adjusted pre-tax profits up 26 per cent to £4.5 million.

CEO Charlie Peppiatt commented: “Positive progress has been made in the first half with increasing operational output and continued strong levels of customer engagement on new product opportunities.

“The investments we have made to add capacity have driven increased revenue and reduced our overdue backlog.”

The current order book is also said to include “significant new program wins” for next-generation products in the field of acousto-optic modulators, high-reliability fiber-optic coupling technology, electronic optical sighting systems, and medical lasers.

Lead times down
In its overview of the latest trading period, G&H pointed out that the increase in revenues was partly the result of currency effects - with the sales increase adjusted to 21 per cent on a constant-currency basis.

The firm says that with its production teams better resourced, progress has been made in both reducing the level of order-book arrears and the lead times that G&H is able to offer customers for the delivery of new orders.

As well as the increased operational effectiveness, the company pointed to strong demand from the industrial laser and semiconductor manufacturing sectors as the key reasons behind the rise in sales.

“[G&H] is supplying products that are at the heart of state-of-the-art deep ultraviolet and extreme ultraviolet lithography equipment used in the production of the most advanced microchips in the world,” noted the firm’s management in their operational review.

“One of these programs is now entering high-volume production and is expected to provide us with good support for our semiconductor market revenues for several years to come. The drive for technological sovereignty in the area of semiconductor manufacture underpins strong demand from end customers.”

Divisional sales
On the industrial laser side, demand in Asia was driven by a post-pandemic rebound as customers sought to ensure both continuity of supply and to mitigate the effect of price inflation - although some of the same customers have now pushed back delivery dates for orders already placed, as they look to normalise inventory levels.

As a result, G&H’s industrial division was able to report a 37 per cent jump in sales year-on-year to £37.9 million, revised to 22 per cent on a constant-currency basis.

The firm’s aerospace and defense division reported a similarly sharp rise in sales, thanks to several US programs for military guidance systems entering the production phase.

“Demand for our precision optics used in military imaging systems has also been strong,” G&H noted, with divisional sales up 34 per cent to £17.5 million.

The company’s life sciences division saw a more modest rise, with sales up 19 per cent to £15.8 million - thanks partly to a rebound in demand for optical components used in cosmetic laser procedures.

Strategic review
In a presentation accompanying the latest results Peppiatt also outlined an updated strategy, describing it as: “A new approach delivered with agility and wisdom to avoid repeating the problems of the recent past.”

Priorities include a continued emphasis on diversification - albeit “within limits and with greater discipline”, and a look to move up the value chain to incorporate optical coatings, packages, and subsystems, as well as full systems for life sciences applications.

“Many elements of the company’s existing strategy over the last seven years, aimed at diversification into new markets, focused R&D investment, operational excellence, and value enhancing acquisitions, were valid but execution and implementation had stalled and a refresh was required,” stated the management team in its review.

Where the CEO is hoping to make changes includes more pro-active outsourcing of products earlier in their life cycle where technological sovereignty is not a differentiator.

“The new strategy will address non-performance and the process to assess and rationalise non-core product lines has begun,” stated G&H.

“This will be carried out in combination with pursuing strategic ‘speed to value’ acquisitions that enhance value creation through delivering commercial and operational synergies, and which fill a gap in our existing portfolio.”

• G&H also announced a rebranding of its "ITL" medical device subsidiary, which will now be referred to as "G&H | ITL".

“This rebrand represents the next chapter in our company’s growth and evolution,” remarked CEO Peppiatt. “The new look will help us build a stronger brand, better serve our customers, and drive the next phase of growth in the business.”

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