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AIMprospector

Hi-tech West Country firm is making hay From its headquarters in Ilminster, Somerset, Gooch & Housego (G & H) is a world-class technology manufacturer and engineer, enjoying high sales and profit growth. The company researches, designs, engineers and manufactures advanced photonic systems, components and instrumentation. Wikipedia defines photonics as ‘the generation, emission, transmission, modulation, signal processing, switching, amplification, and detection/ sensing of light’. G & H’s work involves the provision of components, sub-systems and systems for laser-related end products, such as providing much of the optical hardware that goes into the Retinal Scanning Systems found in high street opticians. Customers include Honeywell, Agilent Technologies, Northrop Grumman and Leica. G & H serves its customer base via three UK facilities and five sites in the US. Gooch & Housego provides equipment used in, for example, fibre optic telecoms systems. As the deployment of photonics solutions moves deeper into aerospace, communications and medicine, G & H looks set to enjoy continued sales growth. Management strategy is to move the company up the value chain, from being a manufacturer of components, www.aimprospector.co.uk

to more specification, design and build work. This would see the company become a key partner for systems manufacturers rather than just a component supplier.

three UK facilities and five sites in the US Based in Torquay, the company’s Systems Technology Group is at the forefront of this effort. This operation draws expertise from all G & H sites. The company has doubled the size of this team in 2014. G & H’s most recent trading statement suggested that its strategy is already delivering, with management highlighting new product development initiatives that are aligned with the company’s long-term strategic objectives. The announcement also confirmed that the year to September 2014 is expected to finish in-line with management expectations. The Stockopedia 2014 consensus forecast figure is currently 35.2p, a 27% increase on the normalised EPS figure reported last year.

18% ahead of where it was twelve months prior

Chief Executive, Gareth Jones, took the opportunity to point out that management initiatives are delivering greater operational efficiencies and improved margins. Current consensus is for a 2015 EPS number that is just 9.6% ahead of the forthcoming 2014 result. If the sales and margin growth already reported can be sustained then I would expect forecasts to be upgraded. As photonics applications increase and the industry grows, G & H is likely already on the radar of larger engineering technology firms. Meanwhile, the company continues to reward its shareholders via dividends and share price growth. Back in 2010, the shares traded at less than two pounds. Dividends totalled 2p per share for the year. For 2013, dividends of 6.6p were declared. The shares began 2014 trading at more than 700p, having advanced at a slightly faster rate than the dividend. Gooch & Housego (LON:GHH) FOR Market leading position Strategy looks to be working AGAINST CEO change at end of year Strong pound could affect exports

More encouraging is the fact that management reported an order book for the start of the 2015 year that is 18% ahead of where it was twelve months prior.

Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£156m 630p:655p 18.6 1.1% 591p:740p

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November 2014 AIM Prospector  
November 2014 AIM Prospector  

Featuring ten AIM-quoted companies: Dillistone Group, Begbies Traynor, FW Thorpe, Gooch & Housego, Nationwide Accident Repair Services, Spr...