It was a tough first half for photonics company Gooch & Housego (LON: GHH) although management is confident that the second half will be much better. Next year should show a much greater recovery in profit.
In the six months to March 2022, revenues fell by 7% to £54.1m, while pre-tax profit was more than one-quarter lower at £3.6m. Even so, the interim dividend was raised from 4.5p a share to 4.7p a share. Net debt is £5.9m.
Demand for products supplied by the industrials division continued to be strong but staff shortages due to Covid meant that it was difficult to satisfy demand. Component shortages are being managed. This is the one
Life science revenues were slightly lower with increased demand for products for elective surgery offset by the loss of Covid-related ventilator revenues.
There was a sharp decline in aerospace and defence division revenues. Again, there were staff shortages due to Covid and customer were also hit. That meant that orders could not be delivered to the client. There are indications of recovering commercial aerospace demand. Delays and new contracts mean that the order book is nearly 50% ahead of one year ago.
Forecast
The group order book is 26% ahead at £119.9m. Price rises are being pushed through to cover higher costs.
Forecasts are being maintained. Pre-tax profit could dip from £12.6m to £11m even with the cost benefits of restructuring. That still suggests a small decline in second half profit. The share price jumped 75p to 930p, which is still one-third lower than one year ago. That is 27 times prospective 2021-22 earnings, although it does fall to 19 next year. Gooch & Housego has strong positions in its main markets, so it warrants a high rating. There is also potential for acquisitions to boost earnings. There are available bank facilities to do a significant deal.