Gooch & Housego (GHH) H1 2024 earnings summary

Executive summary

• Revenue from continuing operations declined 1.4% year-over-year to £63.6m, mainly due to prolonged reduced demand and customer destocking in industrial and medical laser markets, but the group is positioned for recovery in 2025.

• Adjusted operating profit fell 29% to £3.8m, with adjusted profit before tax at £2.6m and adjusted basic EPS at 8.3p, reflecting lower volumes and the impact of the EM4 divestment.

• The group completed the divestment of EM4, retaining the strategic fused fiber coupler product line, and successfully integrated GS Optics and Artemis, delivering commercial synergies.

• Operational improvements led to a 50% reduction in factory past due backlog to £3m and improved delivery metrics.

• The order book remains robust at £115.8m–£125m, providing over 95% cover for expected FY 2024 revenues.

Financial highlights

• Organic constant currency revenues declined 5.3% year-over-year.

• Gross margin improved to 29.1% from 28.5% despite lower volumes, aided by pricing actions and new program margins.

• Adjusted operating profit margin fell to 6.0% from 8.4% year-over-year.

• Net debt (including leases/IFRS 16) was £30.4m, leverage ratio 1.3x; £36m undrawn funding available.

• Interim dividend per share increased to 4.9p.

Outlook and guidance

• Full-year expectations remain unchanged, with execution risk for a large H2 reduced but still present.

• Recovery in industrial and medical laser markets expected in early 2025.

• Strong order book and pipeline provide confidence for future revenue.

• Capital expenditure for FY2024 expected at £7m–£8m; R&D spend circa £7m (5–6% of revenue); adjusted effective tax rate guided at 19–20%.