Gooch & Housego Regulatory News (GHH)

Gooch & Housego PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2013

Gooch & Housego PLC ("Gooch & Housego", or "G&H", or the "Company", or the "Group"), the specialist manufacturer of optical components and systems, today announces its preliminary results for the year ended 30 September 2013.

Financial Highlights

*adjusted figures are stated after excluding the amortisation of acquired intangible assets and exceptional items being acquisition costs and restructuring costs.

Operating & Strategic Highlights

· Efficiency and volume drive margin improvement from 13.5% to 15.3%

· Strong cash performance results in net cash position at year end

· 21% growth in the full year dividend reflecting the strength of the balance sheet

· Systems Technology Group established to accelerate transition from components supplier to solutions provider

· Post period end: -

o Acquisition of Spanoptic opens up new opportunities in Aerospace & Defence and brings supply chain and manufacturing partner in China

o Acquisition of Constelex strengthens STG team and brings satellite communications expertise

· Increased geographical footprint established across the Far East

Gareth Jones, CEO commented

"Gooch & Housego has made considerable progress in line with its strategic objectives to yield a better balanced business with enhanced growth potential in diversified markets.

With excellent customer relationships and a strong pipeline of new products the Company is well-positioned to deliver sustained growth and continued margin improvement."

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Chairman's Statement

"Our consistent strategy of diversifying the company's product range & customer base has been successful in the year"

I am pleased to report that your company made good strategic progress in the last twelve months on many fronts, against a challenging market backdrop.

While revenues showed some growth in the year, adjusted profit before tax was 18.3% higher due to increased volumes and efficiency savings. This was achieved despite an increase in our investment in research and development. Cash management remains a focus for the Group and at the year-end we were in a net cash position. Following two acquisitions since the year end, this has moved to a very manageable modest debt.

The Board's responsibilities include ensuring that; Gooch & Housego has a robust and achievable strategy, investments are made without undue risks, we have the resources to achieve our objectives and that the Company operates efficiently. Our consistent strategy of diversifying the Company's product range and customer base was effective in the year with the establishment of our new Systems Technology Group and the subsequent award of a number of early stage development contracts in the Space sector. It is expected that these activities will lead to business growth as the products progress from the development phase and enter production in the medium term. These contracts will assist in the business moving up the value chain into subsystems in line with our strategic objectives. Gooch & Housego's risks in this new sector are also minimised as these new product developments are mostly externally funded.

We continued to assess ways of improving the efficiency and the effectiveness of the business and management changes and organisational improvements were made this year to the marketing and sales activities of the group. We are further exploring if efficiency would benefit from a reduction in the number of sites in the US by consolidating capabilities. Progress was also made in sharing technology between operations, whilst recognising national security constraints. In manufacturing, plans were made to increase the use of our partner company in the Czech Republic where labour costs are significantly lower, whilst maintaining product quality.

The global environment in which we enter our new financial year remains unclear. In the US, budget uncertainties continue to cloud our vision and the reduction in Government spending could limit our opportunities in Aerospace and Defence. It is however important to note Gooch & Housego's technology has the advantage of being relevant in areas where expenditure is likely to be least affected. In the Far East and Europe, some improvement in the economic situation is evident which we expect to benefit the Company in due course.

Finally, on behalf of the Board, I would like to thank all employees for their efforts and contribution during the year to the success of the Company. With their support, the Board believes the company is well placed to continue its growth into the future.

Dr Julian Blogh

CEO Review

"Despite what at times have been challenging market conditions, Gooch & Housego has traded well, whilst investing in initiatives that underpin long term growth"

Trading conditions during the year were broadly positive, albeit set against a background of some uncertainty affecting most of the sectors in which Gooch & Housego operates. Order intake was at the level needed to sustain growth in the business. The order book ended the year at £27.8 million, an increase of 12% from the beginning of the year.

Gooch & Housego has seen continued growth in its Aerospace and Defence business despite the headwinds affecting this sector. While some significant programmes stalled or were subject to delays, other more mature programmes proceeded as planned and outweighed the setbacks. While this market continues to be challenging, the Company remains optimistic about continued growth prospects based on the strong customer relationships that have been developed in recent years and the breadth of opportunities currently being addressed.

In line with its strategy, the Company has continued to diversify its activities in the Industrial sector, with sensors and test and measurement systems growing in importance over the past year. In the industrial laser market Gooch & Housego has kept pace with the technology shift away from solid state lasers in favour of fibre lasers for many routine materials processing applications. The Company is now a major supplier to the fibre laser market at both component and subsystem level.

In Life Sciences, the Company began to utilise its Systems Technology Group (STG), established mid-way through the year, to leverage Gooch & Housego's excellence in components to develop subsystems-level products to address new opportunities in laser surgery and to build upon its already strong presence in Optical Coherence Tomography (OCT). These initiatives, combined with established business in microscopy and research and development work in diagnostics, have reinforced Life Sciences as one of the Company's main growth markets.

Creating the means to deliver growth has been a primary objective during the past year. The aim has been to build a broadly-based business that can deliver sustainable growth in flat economic conditions and is able to respond to economic recovery, while being sufficiently well-balanced to minimise the effects of market cyclicality. We have sought to deliver growth in a number of ways:

· Via organic growth and new product development

· By moving up the value-chain from components to subsystems

· By developing new application areas where Gooch & Housego can take a market leading position

· Through acquisitions, where they accelerate the delivery of our strategic objectives

· By leveraging our supply chain and low-cost manufacturing relationships to increase competitiveness

· By strengthening our presence in geographical markets with significant growth potential

Organic New Product Development

A more focused approach to research & development has paid dividends in 2013, with a significant number of new products being brought to market. These new products have ranged from acousto-optic, electro-optic and fibre optic devices, to sophisticated laser sources and optical amplifiers, spanning a broad range of application areas ranging from microelectronics to satellite communications. By carefully selecting our projects, based on enhanced market intelligence derived from increasingly close relationships with our major customers, we have been able to increase the success rate and value of the new products we have developed.

Organic Growth - Moving up the Value Chain

The Systems Technology Group (STG) was established to drive organic growth at the subsystems level. Recognising that it is difficult to make the transition from components to systems, and inefficient to try to do this at multiple locations, the STG provides Gooch & Housego with a vehicle to undertake the development of complex photonic sub-systems without the constraints that apply to its component manufacturing operations. With optical, mechanical, electronic and software design and modelling capabilities, and the ability to integrate multiple photonic component technologies (for example, fibre optics, semiconductor lasers and acousto-optics), each of which may be manufactured at a different Gooch & Housego facility, the STG is able to lead and coordinate complex projects with commercial customers, space agencies and collaborative partners. Although still a small team (seven people at the year-end), the STG is expected to double in headcount during 2014. The STG is also able to call upon development and engineering resources from across Gooch & Housego, and works with outside partners and consultants, with the result that it is able to take on more demanding projects than its small size would suggest.

The STG has initially focussed on space photonics and optical coherence tomography (OCT). In both applications G&H is experiencing customer pull to supply "black-box" solutions, rather than low-level components. In these new markets G&H's customers tend to be very large organisations that perform the role of systems integrator, and they are not well-equipped to interact at the component level.

In space applications, photonics technology has significant advantages over the equivalent electronic systems that are the norm today (specifically lower mass, higher bandwidth and reduced power consumption, all of which contribute to lower cost). A major technology shift in favour of photonics technology is taking place and represents an opportunity for Gooch & Housego to take a leading position in this rapidly developing new market. Gooch & Housego has a strong heritage in space qualified photonic components and the objective is to leverage this to develop a family of subsystems for applications in telecommunications and earth observation satellites. Once proven in satellite applications it is anticipated that this technology with filter down to the much larger commercial and military aerospace markets. (G&H has already participated in several collaborative projects with aerospace partners to investigate the application of fibre optic networks for data, sensing and control systems in next generation aircraft.) The STG has successfully bid for a number of European Space Agency (ESA) and European Union Framework 7 (EU FP7) collaborative programmes and has recently completed a programme to design and demonstrate a fibre optic amplifier suitable for use in a satellite laser communications system.

Acquisitive Growth

Shortly after the year end Gooch & Housego completed the acquisition of Spanoptic Limited ("Spanoptic"), a manufacturer of precision optical components based in Glenrothes, Scotland.

Spanoptic specialises in spherical and aspheric lenses and diffractive optics for applications in the ultraviolet, visible and infrared regions of the spectrum. This capability is highly complementary to Gooch & Housego's predominantly planar optics business and enhances the Company's ability to provide complete subsystem solutions to its customers in line with its strategic objectives. Spanoptic's capabilities in infrared optics and coatings are particularly relevant to Gooch & Housego's activities in the Aerospace and Defence sector.

In recent years Spanoptic has invested heavily in state-of-the-art optical manufacturing, metrology and thin-film coating equipment. These investments have enabled Spanoptic to produce optical components at the upper end of the quality and precision scale while maintaining highly competitive pricing. As a result, Spanoptic has been able to win business and develop strong, mainly European customer relationships across a broad range of applications including analytical instrumentation, optical sensing, security, imaging, life sciences and aerospace and defence.

Also following the year end, in late November 2013 Gooch & Housego, also completed the acquisition of Constelex Technology Enablers Limited (Constelex), a small Athens, Greece, based business specialising in the design and manufacture of low-noise, high power optical fibre amplifiers and lasers for applications in telecommunications, sensing and defence. The Constelex team will relocate to the UK in early 2014 and will be based at Gooch & Housego's Torquay facility as part of the STG. Constelex brings highly relevant optical systems expertise to the STG plus a number of ESA and EU funded collaborative projects in the space photonics field. The acquisition of Constelex will add valuable skills and experience to the STG and will help to accelerate the delivery of the Company's strategic objective of becoming a leader in space photonics.

Increasing Competitiveness

Spanoptic's competitive advantage is further enhanced by the strategic alliance that it has with a Chinese manufacturer of precision optics, optical sub-systems and instrumentation. This alliance is being developed and extended to provide Gooch & Housego with an enhanced foothold in the increasingly important Chinese market and to serve as a high-quality, low-cost manufacturing partner for both components and systems. With the ability to manufacture photonic sub-systems and instrumentation in higher volumes and at lower cost than would be possible elsewhere within Gooch & Housego this relationship will enable the Company to scale to higher volumes than would otherwise have been possible.

Similarly, we have made greater use of our established European contract manufacturing partner based in the Czech Republic to enhance the competitiveness of our products, a process that will continue in the current year.

Strengthening our Presence in Geographical Markets with Significant Growth Potential

2013 has seen a number of initiatives to increase our penetration of Far Eastern markets. Over the past 25 years Gooch & Housego has grown its business in Japan with the assistance of its distribution partners. In order to gain access to new opportunities and to demonstrate commitment to this important market Gooch & Housego Japan KK was established and an office opened in Nagoya in April 2013. A number of significant new opportunities are already under development. . In addition to the new relationships in China that came with the acquisition of Spanoptic, we have strengthened our applications engineering team there and opened a sales office in Singapore during 2013.

Summary

During 2013, G&H has made considerable progress in line with its strategic objectives to yield a better balanced business with enhanced growth potential.

G&H has become a more vertically integrated business. At the component end of the scale, the acquisition of Spanoptic has added highly complementary capabilities in precision optics. The STG has given G&H a vehicle with which to provide its customers with sub-systems design and development services, and the acquisition of Constelex has enhanced the ability of the STG to develop complex systems for space and telecommunications applications.

Greater efficiency and volume has helped to deliver revenue growth at improved margins, resulting in strong cash generation and a net cash position at the year end.

Prospects

G&H has taken a number of important initiatives in the past year - a re-focussing of Research & Development and Sales & Marketing, the creation of the STG and the identification of new markets such as space photonics. When combined with the acquisitions of Spanoptic and Constelex, these initiatives provide G&H with the means to deliver growth in a flat economy, and the ability to respond to, and benefit from, market recovery.

With excellent customer relationships and a strong pipeline of new products G&H is well-positioned to deliver sustained growth and continued margin improvement.

Gareth Jones

Performance Overview

FINANCIAL PERFORMANCE

The business has delivered profitable growth and improving margins whilst experiencing variable demand patterns within our core markets. The trend towards a more evenly balanced business has continued, reflecting our strategy of diversification and our efforts to develop new opportunities in Aerospace and Defence and Life Sciences.

Following a steady first half, the second half of this financial year experienced strong sales into many of our market sectors. It is particularly pleasing to report sales growth of 16.3%, in aggregate, in our key target markets of Aerospace & Defence and Life Sciences. These markets now account for 38.9% of Gooch & Housego's total revenue.

In the financial year under review, margins benefited from the greater operating leverage gained from increased volumes and from efficiency gains made by the business this year. As a result adjusted operating margins have increased to 16.2% (2012: 14.7%).

REVENUE

Group revenue for the year was a record £63.3m, an increase of £2.4m, or 4% over the previous year of £60.9m. On a consistent currency basis revenue was 3% higher than the previous year.

In our Aerospace & Defence business segment revenue grew by 11.9% from £15.4m last year to £17.3m this year. Similarly revenue in our Life Sciences business grew by 28.3%, from £5.7m to £7.4m. Sales into our industrial market fell by 4.0% this year on the back of weaker business in our telecommunications and traditional Q-switch markets.

A more detailed analysis of revenues by market was shown in the Market Analysis section, later in this report.

GROUP EARNINGS PERFORMANCE

The Group adjusted profit before tax amounted to £9.7m (2012: £8.2m) and represented a return on sales of 15.3% compared with 13.5% in the previous year. Statutory profit before tax was £8.3m compared with £7.1m last year.

The effective rate of tax was 25.8% (2012: 24.8%), reflecting a combination of the varying tax rates applicable throughout the countries in which the Group operates, principally the UK and the USA. The introduction of the patent box tax rate from April 2013 has not contributed to a lower tax rate in 2013 and will not in 2014. The effective rate of tax should benefit in the future from further reductions in the UK tax rate.

Adjusted earnings per share (EPS) increased from 28.2p to 32.0p. Basic EPS was 27.7p compared with 24.4p last year.

RECONCILIATION OF ADJUSTED PERFORMANCE MEASURES

NON GAAP MEASURES

The Company uses a number of non GAAP measures which are shown in the table above and in the segmental analysis. These measures are used to illustrate the impact of non-recurring and non-trading items on the Company's financial results. These are the impact of the amortisation of acquired intangible assets, acquisition costs and costs associated with restructuring activities In addition, the Company uses the term EBITDA (Earnings before interest, taxation, depreciation and amortisation). This is a commonly used measure of operating performance and cash flow.

SEGMENTAL ANALYSIS

Industrial

Our Industrial business fell marginally during the year, with revenues of £34.3m, compared with £35.8m last year. Revenue from the Group's traditional Q-switch product fell during the year, as anticipated, and now represents 12.2% of total group revenues. We believe this reflects the continuing shift towards the use of fibre lasers in materials processing applications. This appears to be supported by the significant increase in sales of fibre laser components experienced by G&H in 2013. Telecommunications revenues were down in 2013 following the completion of the London Olympics, a one off benefit experienced in 2012 and the continuing softness in the undersea components business.

Operating profit for the Industrial sector as a whole was 6.8% higher at £7.0m, compared with £6.6m last year. This reflects a combination of cost-saving initiatives and a better performance from our Palo Alto facility, being offset to some extent by a poorer product mix.

Aerospace & Defence (A&D)

Our A&D business revenue increased by 11.9% from £15.4m to £17.3m in 2103. Despite a significant reduction in engineering contracts, which were affected by US Government sequestration issues, the business was able to deliver considerable growth in this market sector. This was driven through the provision of both components and systems to our UK and US A&D customers. Operating margins in this sector were marginally down in percentage terms, but increased absolutely. This reflected the combination of mix and volume this year.

Life Sciences

Gooch & Housego grew its presence in the Life Sciences sector in 2013 with revenues of £7.4m (2012: £5.7m). The growth in this market was driven by the Optical Coherence Tomography (OCT) and Microscopy markets. Operating margins in this sector were marginally down in percentage terms, but increased absolutely. This was mainly a reflection of the business having to absorb a larger share of Group costs.

Scientific Research

Our activities in the Scientific Research market are dominated by a small number of large, long-term programmes. This market saw growth in 2013 on the back of increased business from laser fusion projects. These programmes are now largely complete, although we do expect on-going business to service replacement and maintenance requirements.

RESEARCH & DEVELOPMENT (R&D)

Gooch & Housego continues to invest in R&D in all areas of the business and regards this as fundamental to the continued growth of the company. There were a large number of product releases in 2013 and there is an extensive new product pipeline with a number of new product introductions anticipated in the 2014 financial year.

Expenditure on R&D in the year to 30 September 2013 increased by 15% from £4.3m to £4.9m. A proportion of this increase was funded through UK Government and European grant funding. R&D expenditure represented 7.8% of revenue (2012: 7.0%). In addition the Group capitalised £0.03m (2012: £0.01m) of R&D expenditure.

BALANCE SHEET

The Group's shareholder's funds at the end of the year were £64.9m, an increase of £6.4m over the prior year. This increase mainly comprised £1.1m from share capital / premium and £5.5m from retained earnings.

Additions to tangible fixed assets totalled £2.5m. The main fixed asset additions were in response to the increase in aerospace and defence business, where a further £1.0m has been invested in extending coating and precision optics capabilities. £0.5m has also been invested in expanding our Torquay facilities and equipment in the establishment of the Systems Technology Group into this site.

Working capital was 24.7% of revenue in the current year compared to 21.3% in 2012. Inventories have increased by £0.6m from £12.8m in 2012 to £13.4m at this year-end. This has been driven by the necessity to hold safety stocks for our A&D customers. Since the half-year the business has worked on initiatives to reduce inventory. This has resulted in inventory carrying values reducing by £0.8m from £14.2m as at 31 March 2013. Trade debtors increased from £9.2m to £10.2m following a strong final quarter revenue performance.

Cash balances at 30 September 2013 were £14.6m, compared with £11.7m at 30 September 2012. Net cash flows from operating activities generated £9.2m, compared with £8.9m last year. During the year the business moved from a net debt position of £0.3m as at 30 September 2102, to a net cash position of £5.7m.

MOVEMENT IN NET (DEBT)/FUNDS

ORDER BOOK

As at 30 September 2013, the Group order book stood at £27.8m, compared to £24.9m at the end of the 2012 financial year, a 12% increase. On a like for like basis, excluding the impact of foreign exchange, the order book was 12% higher. Book to bill ratios for the business as a whole were 0.98 times (six month rolling average) as at 30 September 2013, compared to 1.01 times for the same period last year.

STAFF

The Group workforce reduced slightly from 588 at 30 September 2012 to 581 at the end of September 2013, a fall of 7. This is a net position and therefore reflects both the reductions in staffing resulting from the work the business has done in integration and rationalisation of sites and processes and the additional investment that the business has made in engineering, business development and senior management. During the year the Group appointed Jon Fowler as EVP Commercial Development. Mr Fowler was an internal appointment having previously held a general management role in our US operations. Mr Fowler brings a wealth of customer development experience to this role.

POST BALANCE SHEET EVENTS

On the 15 October 2013 Gooch & Housego announced that it has completed the acquisition of Spanoptic Limited ("Spanoptic"), a manufacturer of precision optical components, based in Glenrothes, Scotland,

Founded in 1976, Spanoptic currently employs 62 people and in the year ended 31 December 2012 had revenues of £7.7 million and made a profit before tax of £1.0 million. Spanoptic had net assets of £5.5 million at acquisition, including net cash of £0.7 million. The gross cash consideration paid by Gooch & Housego was £6.6 million, funded from existing cash and debt facilities.

Spanoptic will continue to operate from its Glenrothes factory as an integrated part of Gooch & Housego's UK precision optics business. As a long-term supplier to G&H (Gooch & Housego accounted for approximately 1.5% of Spanoptic's turnover in the year to 31 December 2012), Spanoptic is well-known to the Gooch & Housego management team and has been the subject of regular quality and process audits in recent years.

On the 25 November 2013 Gooch & Housego announced that it had completed the acquisition of Constelex Technology Enablers Limited (Constelex), an Athens, Greece, based designer and manufacturer of advanced photonic systems.

Constelex is a small, start-up company specialising in low-noise optical fibre amplifiers. With a mission to become a world-leading design-house and solution provider for photonic systems with applications in telecommunications, space, defence and life sciences, Constelex has built up a strong reputation for technical excellence since it was founded in 2009. As a result, Constelex has enjoyed considerable success in securing contracts from the European Space Agency and attracting funding from the European Union to develop complex photonic systems for predominantly space and satellite applications.

DIVIDENDS

The Directors propose a final dividend of 4.0p per share making a total dividend for the year of 6.3p (2012: 5.2p). The final dividend will be payable on 28 February 2014 to shareholders on the Company's share register as at close of business on 7 February 2014.

KEY PERFORMANCE INDICATORS (KPIs)

The Company's objective is to deliver sustainable, long-term growth in revenue and profits. This is to be achieved through the execution of the Board's strategies of market diversification, the continued investment in R&D to support organic growth, the acquisition of strategically complementary businesses and the on-going drive to move up the value chain.

In striving to achieve these strategic objectives, the main financial performance measures monitored by the Board are:

The Board is focused on delivering revenue growth by investing both organically and through acquisitions. The Group business has delivered underlying growth, whilst experiencing variable demand patterns within its core markets.

The Company's target markets of Aerospace and Defence and Life Science provide a route to sustainable growth, and a more diversified revenue base. These markets also provided significant opportunities for Gooch & Housego to migrate up the value-chain from materials and components to higher value sub-assemblies, modules and systems in response to the trend for our larger customers to outsource increasingly complex parts of their business. The business has made good progress in addressing its target markets of Aerospace and Defence and Life Sciences which, in aggregate, have increased by 16.3% in the 2013 financial year.

In order to balance business risk with the investment needs of the Company, Gooch & Housego closely monitors and manages its net debt. This year the business moved from a net debt position of £0.3m as at 30 September 2102, to a net cash position of £5.7m, putting the business in a strong position both in terms of headroom for further investment and from the perspective of managing its business risk.

As a result of a strong trading performance, the business has been able to deliver growth in adjusted diluted EPS of 15.5%, from 26.4p to 30.5p in 2013.

 Group Income Statement

For the year ended 30 September 2013 (unaudited)

Reconciliation of operating profit to adjusted operating profit:

Group Balance Sheet

As at 30 September 2013 (unaudited)

Group Statement of Changes in Shareholders' Equity

For the year ended 30 September 2013 (unaudited)

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2013 (unaudited)

Group Cash Flow Statement

For the year ended 30 September 2013 (unaudited)

 Cash, cash equivalents, working capital facility and bank overdrafts at the end of the period comprise:

Notes to the Preliminary Report

1 Basis of Preparation

The unaudited Preliminary Report has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 30 September 2013.

The Preliminary Report was approved by the Board of Directors and the Audit Committee on 27 November 2013. The Preliminary Report does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006 and has not been audited.

Comparative figures in the Preliminary Report for the year ended 30 September 2012 have been taken from the Group's audited statutory financial statements on which the Group's auditors, PricewaterhouseCoopers LLP, expressed an unqualified opinion.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2012, as described in those financial statements. New standards or interpretations which came into effect for the current reporting period did not have a material impact on the net assets or results of the Group.

The Preliminary Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 3 December 2013. Copies will be available to members of the public upon application to the Company Secretary at Dowlish Ford, Ilminster, Somerset, TA19 0PF.

2. Segmental analysis

The business of the Company is divided into four market sectors, being Aerospace and Defence, Life Sciences, Industrial and Scientific Research, together with a Corporate cost center.

The Industrial business segment primarily comprises the industrial laser market for use in the semiconductor and microelectronic industries, but also includes other industrial applications such as metrology and telecommunications. Scientific Research covers academic and government funded research including major multi-national projects.

2. Segmental analysis - continued

¹EBITDA = Earnings before interest, tax, depreciation and amortisation

All of the amounts recorded are in respect of continuing operations.

Analysis of revenue by destination and net assets by origination:

for year ended 30 September

3. Income tax expense

The income tax expense for the year to 30 September 2013 is set out below.

4. Earnings per share

The calculation of earnings per 20p Ordinary Share is based on the profit for the period using the weighted average number of Ordinary Shares in issue during the period as a divisor. The weighted average number of shares for the year ending 30 September is given below:

A reconciliation of the earnings used in the earnings per share calculation is set out below:

Basic and diluted earnings per share before amortisation and adjustments have been shown because, in the opinion of the Directors, it provides a useful measure of the trading performance of the Group.

5. Dividend

The Directors propose a final dividend of 4.0p per share making the total dividend paid and proposed in respect of the 2013 financial year 6.3p (2012: 5.2p).

6. Cash generated from operating activities

7. Events after the reporting date

The group acquired 100% of the share capital of Spanoptic Limited a Glenrothes, Scotland, based manufacturer of precision optical components for a gross consideration of £6.6m, funded from existing cash and debt facilities on 15 October 2013.

On 26 November 2013 the group acquired 100% of the share capital of Constelex Technology Enablers Limited, an Athens, Greece, based designer and manufacturer of advanced photonic systems. The gross consideration will be €650,000, comprising €400,000 in cash, funded from existing cash and debt facilities, at completion, followed by €250,000 in Gooch & Housego shares once activities are relocated to the UK.