Gooch & Housego recommences dividends

30th Nov 2010 16:06

Strong recovery in the industrial market has helped photonic components supplier Gooch & Housego almost double its underlying profit in the year to September 2010 and announce a dividend. AIM-quoted G&H's products go into lasers and other capital equipment and it is demand for this equipment from manufacturers of electronic consumer goods, such as iPads and iPods, which has pushed up revenues. Aerospace and life sciences demand is also growing. Cuts in defence spending could be good for G&H if this means that existing equipment is upgraded rather than replaced. Group revenues grew 23% to £44.7m, while underlying pre-tax profit jumped 94% to £6m. After cutting back in the previous year, G&H has been adding people in manufacturing. These are concentrated on higher margin products and some of the more basic work has been outsourced. The order book for the current year is already worth £22.4m.House broker Investec is waiting for confirmation that trading is continuing to improve before increasing its 2010-11 profit forecasts from £7.4m. Net debt has been cut 58% to £5.2m at the end of September 2010. Higher capital spending in order to fulfil the increasing demand means that debt will not fall as fast as originally expected but there is plenty of headroom if it is needed. Even so, net debt could more than halve in two years. G&H has returned to the dividend list with a 2p a share final dividend. G&H chief executive Gareth Jones says the company has all the technology it needs but bolt-on acquisitions are a possibility. There are a lot of small companies supplying one or two products that would benefit from coming together with a company with a wider range. Valuations are more reasonable now and the higher share price makes it easier to issue shares to fund deals.