Gooch & Housego : 2022 Interim Report

Interim results - half year ended 31 March 2022

CEO Mark Webster/CFO Chris Jewell

KEY HIGHLIGHTS - RECORD ORDER BOOK, REVENUE CONSTRAINED

• Record order book of £119.9m (31 March 2021: £92.8m), + 29.2%, or + 25.6% at constant currency. H1 order intake 1.42 times H1 revenue.
• Strong and sustained demand in our main target markets. High demand for industrial lasers, in particular from semiconductors; G&H increased market share in a growing market. Medical lasers continue to benefit from the return of elective surgery. A&D affected by customer delays and new programmes yet to progress to volume phase; recent order intake has been very strong.
• Revenue constrained by pandemic related factors. COVID absences impacted our US and UK sites. Substantial investment made to increase capacity. Good progress in recruiting operators and securing supply chain.
• Adjusted profit before tax of £3.6m, down 26.6% given lower volumes and investment in R&D and manufacturing capacity.
• Restructuring programme complete and expected to deliver targeted profit benefits.
• Group remains in a strong financial position with a robust balance sheet and low net debt. A new five year revolving credit facility ($40m committed/ $30m uncommitted) was put in place in March.
• Interim dividend of 4.7p per share (2021: 4.5p) reflecting positive outlook.

"During the first half of the financial year there has been strong demand for the Group's technologies and capabilities and our order book has achieved another record level. However, in common with many industrial businesses revenue has been constrained by COVID related staff absences and supply chain disruption. Full year expectations are unchanged and long- term outlook is positive."

Mark Webster, CEO

INTERIM RESULTS PRESENTATION - H1 2022 PAGE 2

FINANCIAL HEADLINES - SUMMARY INCOME STATEMENT

Period Ended 31 March	2022	2021	Change
		£m	£m
Revenue	54.1	58.5	(7.4)%
Gross profit	17.3	18.9	(8.2)%
Adjusted operating profit	3.9	5.4	(26.9)%
Adjusted operating profit %	7.3%	9.2%	(190) bps
Adjusted profit before tax	3.6	4.9	(26.6)%
Adjusted basic earnings per	11.8p	15.7p	(24.8)%
share (p.p.s)

"In the first half we have been working hard to increase production capacity. As a result we expect trading levels to accelerate in the second half."

Chris Jewell, CFO

• Strong and sustained demand for industrial lasers and in particular semiconductors. Medical lasers benefited from return of elective surgery. Lower H1 defence and sensing.
• Output constrained by COVID absences and some supply chain shortages.
• Increase in capacity as we recruit and train new operators. Good progress made in H1, benefit to come in H2.
• Revenue decline of 7.4%.
• Gross margin of 32.0%, broadly comparable to the prior year, with lower volumes offset by the full year effect of benefits of the site consolidation programme.
• Adjusted H1 operating profit margin fell to 7.3%, from 9.2% in the prior year.
• R&D of £4.1m (H1 2021: £3.9m). This represented 7.6% of
  revenue (H1 2021: 6.7%).
• Adjusted effective tax rate was 17.8% (H1 2021: 19.6%).
• Non underlying items - £2.4m of which £0.8m was cash.

INTERIM RESULTS PRESENTATION - H1 2022 PAGE 3

FINANCIAL HEADLINES - CASHFLOW

Period Ended 31 March	2022	2021
	£m	£m
Net cash flow from operating activities	4.0	9.2
Cash flow from investing activities
Acquisition of subsidiary	-	(3.3)
Purchase of property, plant and	(4.0)	(3.9)
equipment & intangibles
Cash flow from financing activities
Debt and lease drawing / (repayments)	2.8	(5.5)
Interest paid	(0.3)	(0.5)
Dividends paid	(1.9)	-
Net increase/(decrease) in cash and
cash equivalents	0.6	(4.0)
Exchange losses	-	(0.5)
Cash	9.0	15.3
Net Debt (excl. IFRS 16)	5.9	4.7
Net Debt (incl. IFRS 16)	12.0	12.1

• £3.2m increase in working capital since September 2021 as inventory built to support H2 growth in output.
• Capital investment - further precision optics equipment and new Customer Relationship Management software.
• Net debt (excluding the impact of IFRS 16 - Leases) of £5.9m.
• Leverage for bank reporting - 0.3x net debt/ EBITDA
• New five year credit facility in place - $40m committed facility with a further uncommitted $30m accordion for acquisition purposes.

INTERIM RESULTS PRESENTATION - H1 2022 PAGE 4

INDUSTRIAL

Financials (51% of revenue)

	HY22	HY21	Reported
			growth
Revenue	£27.7m	£26.6m	4.4%
Adjusted
operating	£4.1m	£2.9m	40.3%
profit
% margin	14.9%	11.1%	380bp

• Overall revenues to our Industrial markets grew by 4.7% on a constant currency basis, compared with H1 2021.
• Industrial lasers exhibited strong and sustainable growth in the first half, especially for the semiconductor market, where our latest Germanium AOMs captured significant market share in a growing market.
• Increase in capacity 'gated' by hiring and training of operators in very competitive US and UK employment markets. Good progress was made throughout H1, with expected benefit in H2.
• Hi-reliabilityfibre coupler demand was good for undersea cables and an increasing volume for space satellite applications. Revenue was constrained in H1 by COVID absences at our plant in Torquay and at our contract manufacturing partner in Czech Republic. Return to 'normal' absence levels so far in H2. Our aim is to bring online a third site with our contract manufacturing partner in SE Asia by early FY2023.
• Profit margins grew thanks to volumes and the benefits of the outsourcing programme.

Industrial	Optical Comms	Metrology	Remote	Semi-	Scientific
Lasers	Sensing	conductor	Research

INTERIM RESULTS PRESENTATION - H1 2022 PAGE 5