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INTERIM RESULTS HALF YEAR ENDED 31 MARCH 2019 CEO: Mark Webster / - PowerPoint PPT Presentation

INTERIM RESULTS HALF YEAR ENDED 31 MARCH 2019 CEO: Mark Webster / CFO: Andrew Boteler Key highlights Operational & Financial Revenue growth of 7.4% compared to same period last year. This was despite a challenging industrial laser


  1. INTERIM RESULTS HALF YEAR ENDED 31 MARCH 2019 CEO: Mark Webster / CFO: Andrew Boteler

  2. Key highlights Operational & Financial  Revenue growth of 7.4% compared to same period last year. This was despite a challenging industrial laser market, due to cyclical downturn and continued US/ China trade dispute. Excluding foreign exchange, an increase of 4.1%  Anticipate non- industrial laser business will be in line with our expectations. Increase in industrial laser orders since last update, but we are now assuming that industrial laser business will not return to ‘normal’ levels in FY 2019 and instead we will only supply known/ high certainty orders  Given revised industrial laser outlook, Board’s expectations for Group’s adjusted PBT for FY 2019 now reduced by circa £3.5- 4.0 million  Demand for high reliability fibre couplers to benefit from investment made in H1 and show step change in H2. Anticipate a three fold increase in demand over next three years  Life science business has more than doubled compared to H1 last year, due to organic growth across all three life science areas and successful acquisition of ITL  Record half year order book of £93.2 million, as at 31 March 2019, an increase of 10.0% compared with the same period last year. Excluding foreign exchange, an increase of 5.3%. Interim dividend increased to 4.3p (2018: 4.2p) reflecting the Board’s longer term confidence in the business,  whilst acknowledging challenging industrial laser trading conditions “We remain confident in the potential of the industrial laser sector and our other markets to provide attractive long term growth”. Mark Webster, CEO PAGE 2 Interim Announcement June 2019

  3. Financial Overview Financial Track Record Key points: Revenue £’m Adjusted PBT £’m H1 H2 20 140 18 120 16  The business has 14 100 delivered profitable 12 80 10 growth over a nine year 60 8 period. 6 40 4 20 2 0 0  15% CAGR in revenues since FY2009. Net Debt / Cash £’m Dividends pps 12 20 Final  22% CAGR in adjusted 10 15 Interim PBT since FY2009. 8 10 6 5 4  24% CAGR in 0 2 dividends since -5 0 FY2010. -10 -15 PAGE 3 Interim Announcement June 2019

  4. Financial headlines Summary Income Statement Period Ended 31 March 2019 2018 % Change £’000 £’000 Revenue 59,708 55,608 7.4%  Revenue growth of 7.4% yoy or 4.1% excluding foreign exchange. Gross profit 20,196 21,722 (7.0%)  H1 impacted by a 14.4% reduction in core industrial laser and semi-conductor market, Adjusted operating profit 6,054 7,148 (15.3%) which was partially offset by a 126% increase in the Life Sciences / Biophotonics market due to organic growth and successful acquisition of ITL Adjusted operating profit % 10.1% 12.9%  Gross margin reduced to 33.8%, from 39.1% in the prior year due to a mix effect & lower volume Adjusted profit before tax (22.8%) 5,410 7,009 in our industrial laser market. Adjusted basic earnings per  Adjusted operating profit margin reduced to 16.4 21.5 (23.7%) share (p.p.s) 10.1%, from 12.9% in the prior year  Invested £4.0 million in R&D (FY 2018 £4.1 million). This represented 6.8% of revenue  Adjusted effective tax rate was 24.4% (FY 2018: “The diversification strategy of the business 24.2%)  Adjusted basic earnings per share down 23.7% means that G&H has delivered in testing H1 market conditions, with anticipated improvement in H2 across all three main business sectors” Andy Boteler, CFO PAGE 4 Interim Announcement June 2019

  5. Financial headlines Cash Flow Period Ended 31 March 2019 2018  £2.4 million growth in working capital £’000 £’000 following the acquisition of ITL & GFO. On Net cash flow from operating activities 4,401 (495) a ‘like for like’ basis working capital reduced by £1.1 million. Cash flow from investing activities  As expected the year end receivables Acquisition of subsidiary (3,906) (4,414) position has largely unwound and is £5.8 Purchase of property, plant and equipment million lower as at 31 March 2019. (3,590) (3,661) & intangibles  Final instalments of the Kent Periscopes & Sale of property plant and equipment 1,480 - StingRay acquisition earn-outs of £2.1 million & $3.3 million respectively, paid in Interest received 9 7 cash from existing debt facilities in the (6,007) (8,068) period. This represents 84% and 83% of the Cash flow from financing activities maximum potential respectively.  Movement in borrowings (37) (3) £1.5 million received in respect of the sale of the Orlando facility freehold property, Proceeds from issuance of share capital - - following the closure of this site in 2018. Interest paid (518) (111)  Net debt position of £14.5 million, up from Dividends paid to ordinary shareholders (1,733) (1,608) £10.6 million, after £3.9 million on acquisitions and £3.6 million on capex. (2,288) (1,722) Net decrease in cash and cash (3,894) (10,285) equivalents Exchange gains / (losses) 27 (87) Cash and cash equivalents 15,566 16,053 PAGE 5 Interim Announcement June 2019

  6. Industrial Financials (50% of revenue) HY19 HY18 Reported growth Revenue £29.6m £32.5m (8.8%) Adjusted operating £2.2m £4.6m (52.5%) profit % margin 7.3% 14.1% (680bp) • Business in our industrial market polarised between subsectors. • Cyclical downturn in microelectronics and semi conductor markets and continued impact of the US/ China trade dispute. This subsector is down by 14.4 %, albeit compared to historically high performance in previous year. • Impact of technical innovation in industrial manufacturing, 5G, folding phones etc, coupled with our market leading : position in critical components for industrial lasers means we expect industrial lasers to drive growth for G&H for the foreseeable future. • Laser engines in wind turbines, pipeline security and other sensing markets showing good progress • Strong demand for fibre optics generally and hi- reliability fibre couplers for undersea cables specifically. Significant fibre coupler orders have been placed and expect to see ramp up in H2 and into FY 2020 and 2021.  Profit margin was hit by lower overhead absorption and an adverse product mix Industrial Optical Metrology Remote Semi- Scientific Lasers Comms Sensing conductor Research PAGE 6 Interim Announcement June 2019

  7. Aerospace & Defence Financials (31% of revenue) HY19 HY18 Reported growth Revenue £18.4m £18.1m 1.7% Adjusted operating £1.2m £2.1m (42.0%) profit % margin 6.5% 11.4% (490bp)  Revenue grew 1.7% during the first six months of FY2019, compared to the equivalent period last year.  Programme delays to key US defence programmes impacting revenue and profit in H1, partially offset by growth in navigation components.  Significant US defence contracts and orders in latter part of H1/ beginning of H2 :  H1 profit and margin fell due to volume impact  The company is well positioned to exploit the longer term aerospace & defence market dynamics which are favourable for our photonic and fibre optic technologies  Significant programmes in space satellite and UAV communications systems, UAV and armoured vehicle imaging systems and direct energy weapons Target Guidance & Counter- Space Periscopes & Opto- Designation & Navigation measures Photonics Sighting mechanical Range Systems sub systems Finding PAGE 7 Interim Announcement June 2019

  8. Life Sciences/Biophotonics Financials (19% of revenue) HY19 HY18 Reported growth Revenue £11.7m £5.0m 132.2% Adjusted operating £2.0m £0.3m 550.0% profit % margin 17.2% 6.1% 1,110bp  More than doubled revenue growth compared to H1 last year. Driven by organic growth across all three main legacy sectors and the successful acquisition of ITL in August 2018.  Margin grew significantly due to improved volume performance and margin profile of ITL’s system business  The acquisition of ITL should effectively double our life science business and their enhanced systems capability will : enhance our product offering to our medical diagnostics customers  Further investments made in high return R&D programmes for OCT medical diagnostics, laser surgery, microscopy and systems  In addition to our traditional areas we see further opportunity for our photonic and fibre optic technologies in robotic surgery, minimally invasive surgery and OCT related endoscopy Optical Coherence Laser Industrial Microscopy Systems Tomography (OCT) Surgery lasers PAGE 8 Interim Announcement June 2019

  9. Acquisitions ITL, acquired on 8 August 2018 £14 million upfront, with £8 million earn out Effectively doubles life science business, with 100% systems products Enhanced systems capability enables G&H to wrap up photonics technology in a more compelling package for our customers Running ahead of expectations Gould Fiber Optics, acquired on 6 September 2018 $13 million upfront with $3.4 million earn out Combination with G&H creates an unrivalled fused fibre global leader Enhanced access to tier 1 US A&D companies Running behind expectations As anticipated need to upgrade manufacturing processes before we can take full advantage Kent Periscopes, acquired 2016, final tranche of payout paid November 2018, 84% of potential StingRay Optics, acquired 2017, final tranche of payout paid February 2019, 83% of potential PAGE 9 Interim Announcement June 2019

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