Gooch & Housego pulls dividend as earnings slip

(Sharecast News) - Gooch & Housego has pulled its dividend after the Covid-19 pandemic weighed on interim earnings.
The manufacturer of optical components and systems saw revenues for the six months to 31 March slide 3.8%, to £57.5m, while adjusted pre-tax profits tumbled 50.8% to £2.7m.

The Aim-listed firm, which specialises in the industrial, aerospace and defence, and life sciences sectors, attributed the fall to reduced volumes and product mix. As at 31 March, the order book stood at £91.7m, down slightly on the £93.2m recorded a year earlier. In the first quarter, orders were ahead 11.5% year-on-year, but they fell 14% quarter-on-quarter in the three months to March as the pandemic started to weigh on demand.

Gooch & Housego said: "Trading conditions in the first six months were challenging, due to the ongoing Covid-19 emergency and the continuing cyclical downturn in the industrial laser market. The emergency reduced demand initially from our Asian markets and the towards the end of the reporting period from our European and North American markets."

It continued: "The board remains confident in the long-term growth potential of the business, but the short term impact of the Covid-19 emergency remains uncertain."

An interim dividend is not being paid, and Gooch & Housego said the final payout would depend on the full-year trading performance and market conditions.

Mark Webster, chief executive, said: "Measured cost reductions were put in place in the latter part of the first half, enabling us to retain critical capabilities on a return to more 'normal' trading conditions. Good progress has been made on the streamlining of our manufacturing base. Both of these initiatives will deliver signification future margin progression."

Henry Carver, analyst at Peel Hunt, said the interims were in line with expectations.

He added: "We are encourage to note that the manufacturing sites will be back up to full operational capacity, while keeping to social distancing guidelines, by the fourth quarter. We are leaving our forecasts unchanged and we reiterate our 'buy' recommendation and 1,100p price target. The long-term drivers remain at least intact and the financial position is robust."

As at 1215 BST, shares in Gooch & Housego were flat at 1,010.0p.