Gooch & Housego half-year results pick up after slow start

09 Jun 2016

First quarter was "weak" for diverse UK-based optical systems developer but Q2 order boost reflects positively.

Gooch & Housego, a manufacturer of optical components and systems, has announced its interim results for the six months ended March 2016. Group revenue for the half year was £38.4 m ($55.5 m), a fall of £0.6 m, or 1% over the comparative 2015 period; on a constant currency basis, revenue was 5% lower.

The company said it had seen “a steady recovery” in the second quarter after a slower than expected start to the year, characterized by sustained demand for its products. This move from a weak first quarter to a much stronger Q2 was demonstrated by the 57% increase in order intake G&H experienced between the two quarters.

Half-year revenues were “marginally lower” than those of 1H 2015, which was a record half-year, the company statement added. “We continue to expect a good second half trading performance driven by orders for our fibre business, in particular high reliability undersea fibre components, fibre based satellite communications and fibre optic sensing, in addition to a recovering microelectronics sector,” the financial report stated.

The company stated that order intake in the first half of 2016 “has been encouraging” – the order book at 31 March 2016 was £39.1 m (previous year: £34.6 m) and the company had booked £41.1 m in orders since October 2015.

Mark Webster, CEO, commented, “G&H is well-positioned to benefit from improving market conditions and has the capacity to respond to increasing demand. Our commitment to diversification has enabled us to navigate a challenging period at the beginning of the year and still be on track to deliver our full year expectations. We remain committed to our strategy of diversification and moving up the value chain whilst continuing to invest in our continuous improvement programme, which will underpin future performance.”

He added, “The increase in our interim dividend by 10% reflects our confidence in the business going forward and is underpinned by our strong balance sheet.”

Sector performance

Industrial Overall, business in G&H’s industrial markets was described as “good in the first six months of the year”. The report stated, “Overall sales of products into our industrial markets in the six months to 31 March 2016 were 11% higher compared with the equivalent period last year.

The industrial laser market was weaker in the first half of the year driven by lower demand from China for lasers used in microelectronic manufacturing. The shortfall in demand in our industrial laser market was more than offset by increases in its fibre-optic sensing and telecommunications markets.

The company commented, “In fibre-optic sensing G&H’s Fibre-Q products continue to be adopted and lead the way in this fast growing market place, with the result that the Company is now benefitting from positive market trends in fibre optic sensing and generating meaningful revenue streams.”

Telecommunications Whilst sales of lithium niobate wafers for modulation applications “continued to be strong”, the significant growth was coming from demand for fibre optic components for under-sea telecommunications applications. The company said, “We expect this growth to continue to strengthen throughout 2016 and into 2017, as non-traditional companies enter this market and look to lay their own undersea networks. The overall telecommunications market segment increased by 18% compared with the equivalent period last year.”

Aerospace & Defence was down for G&H during the first six months of 2016. The company explained, “The major part of this reduction is a direct function of order and programme timing. This sector is expected to recover in the second half of this financial year. Moreover, with the continued adoption of technologies that play to our core capabilities, together with the investment that the business has made in business development and R&D in this market sector, we continue to believe there is strong growth potential for us going forward.”

Life Sciences This market sector fell by 9% in the six months to 31 March 2016, compared with the equivalent period last year, driven mainly by lower demand requirements from two major customers. The principal commercial application of OCT systems is retinal imaging, and G&H continues to be the leading provider of fibre optic solutions to this industry.

Outlook

The company said it remains committed to the twin pillars of “diversification and moving up the value chain. Current mixed market conditions have emphasised the value of having a more diversified business where the strong performance of our fibre business has allowed us to ameliorate some of the first half impact.”