Gooch & Housego confident despite some reduced demand
By Josh White
Date: Thursday 04 Apr 2024
(Sharecast News) - Photonic components and systems specialist Gooch & Housego said in an update on Thursday that in its first half, it saw some customers in its industrial and medical laser markets adjusting their inventory levels, resulting in reduced demand for certain products.
The AIM-traded firm said that destocking phase was, however, expected to finish by the end of the year, with revenue from those markets set to rebound.
Conversely, the company said it had experienced growth in its medical diagnostic and fibre optic businesses, particularly in serving the semiconductor infrastructure markets.
Revenue for the six-month period was anticipated to be around £67.5m, slightly down from the £71.3m it reported for the same period last year.
That decrease was partly offset by contributions from two acquisitions completed in the prior financial year.
The company said it expected a stronger performance in the second half of the year compared to the 2023 period.
Gooch & Housego said it had received strong new orders from the semiconductor, subsea data cable, and aerospace navigation markets.
Notably, the company secured significant orders for a new fibre optic amplifier module and medical diagnostic products.
Additionally, there was promising interest in its optical systems solutions for armoured vehicles, with expectations to convert several requests into firm orders in the latter half of the year.
As of 31 March, the group's order book stood at £115.8m, making for a slight decrease from the previous year but an organic constant currency increase of 3.6%.
The group said it maintained a robust financial position with a healthy balance sheet and substantial funding available for future growth initiatives, with net debt at approximately £32m.
Strategically, Gooch & Housego said it was continuing to execute its plan announced last year.
The recent divestment of its EM4 business allowed it to concentrate resources on areas within its A&D portfolio where it could achieve better returns.
Moreover, the transfer of selected product lines to contract manufacturing partners in lower-cost regions was progressing, with the expansion of its medical diagnostic facility in Rochester, serving the North American market, being a significant milestone.
"Despite the lower volumes in the first half of the financial year resulting from a prolonged period of inventory adjustment by some of our customers we have continued to focus on the delivery of our strategic objectives. In line with our commitment to become a more customer focused business, we have further improved our operational performance reducing our overdue backlog and lead times," said chief executive officer Charlie Peppiatt.
"Our investment in new technologies and products is recognised by our customers and we have secured important new contract wins in the period."
Peppiatt said that after strategically adding the GS Optics and Artemis Optical businesses in 2023, the company had already been rewarded with new customer orders due to its enhanced portfolio.
"The divestment of our EM4 business in March this year represented an important milestone on our journey to focus our A&D business on those areas where we can secure acceptable returns, supporting the group's path to mid-teens profitability."
Gooch & Housego said it would announce its interim results for the six months ended 31 March on 4 June.
At 1408 BST, shares in Gooch & Housego were up 3.37% at 533.4p.
Reporting by Josh White for Sharecast.com.
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