AIM-listed optical components firm Gooch & Housego (LON:GHH) issued a positive H1 update and confirmed its FY guidance. It also stuck to its medium-term target of a mid-teens return on sales.
Strong demand
For the six months to March, G&H posted a 15.5% increase in revenue to £81.9 million driven by 9% underlying growth. Aerospace and Defence revenue jumped 52% to £35.6 million thanks to strong demand and the contribution from recent acquisitions.
Group operating profit rose 17% to £7.2 million, with margins improving to 8.8% against 8.7% previously. Aerospace and Defence profitability improved ‘significantly’ to £3.6 million, accounting for half of the group total.
The firm’s order book increased 16.5% to a record £167 million, representing almost full cover for expected FY26 revenue. The Phoenix Optical and Global Photonics acquisitions have been largely integrated, providing increased capacity to support the growing order book.
The company reiterated its FY guidance with the caveat results would be weighted towards H2. CEO Charlie Peppiatt also repeated the firm’s commitment to achieving a mid-teens percent return on sales in the medium term.
G&H has been an outstanding performer this year with the shares up 85% thanks to a string of positive updates. As well as Aerospace and Defence, it is active in the semiconductor and industrial markets where demand is also robust.
The record order book shows customers have confidence in the firm’s ability to deliver complex systems, and provides good FY visibility. The challenge as always is to convert this demand into revenue, which is where acquisitions help as they bring additional capacity.
That said, we shouldn’t over look the strides the firm has made in improving its underlying financial and operational performance. Also, given operating margins are sub-10% currently, a medium-term target of mid-teens is punchy.
We’re not concerned the shares have come off this morning, given their stellar run already this year. The market now appreciates G&H is a defence-related stock and it’s also firmly on our radar.
Read the press release here:
