Gooch & Housego revenue decreased on 5.5% and EBITDA Margin showed almost no change

01 Dec 2020 • About Gooch & Housego ($GHH) • By InTwits

Gooch & Housego reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:

Gooch & Housego has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.0%. At the same time it's a lot of higher than industry average of 2.6%.
CAPEX is quite volatile: £0m in FY2020, £0m in FY2019, £0m in FY2018, £0m in FY2017, £0m in FY2016
The company has potentially unprofitable business model: ROIC is 4.1%
It operates with medium-size leverage: Net Debt/EBITDA is 0.9x while industry average is -0.3x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Gooch & Housego's Revenue decreased on 5.5%. During FY2016-FY2020 Revenue growth topped in FY2017 at 30.2% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.1 pp from 32.3% to 41.4% in FY2020. EBITDA Margin followed a declining trend at -1.1 pp per annum in the last 5 years.

Gross Margin decreased on 2.6 pp from 34.8% to 32.1% in FY2020. During FY2016-FY2020 Gross Margin topped in FY2017 at 41.1% and was declining since that time. SG&A as a % of Revenue decreased slightly on 1.9 pp from 23.3% to 21.4% in FY2020. During the last 5 years SG&A as a % of Revenue topped in FY2018 at 25.3% and was declining since that time.

Net Income margin showed almost no change in FY2020. Net Income margin declined at -1.5 pp per annum in FY2016-FY2020.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 4.5% in FY2020. The company showed small CAPEX/Revenue decline of 0.68 pp from 5.2% in FY2017 to 4.5% in FY2020. It's average CAPEX/Revenue for the last three years was 4.6%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2019 at 4.5%.

Return on investment

The company operates at low ROIC (4.1%) and ROE (3.3%). ROIC decreased slightly on 1.5 pp from 5.7% to 4.1% in FY2020. ROE showed almost no change in FY2020. ROIC stuck to a declining trend at -2.0 pp per annum in the last 5 years. ROE followed a declining trend at -1.6 pp per annum in the last 5 years.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.9x and Debt / EBITDA is 2.0x. Net Debt / EBITDA increased on 0.047x from 0.8x to 0.9x in FY2020. Debt increased on 8.4% while cash jumped on 12.7%. Net Debt/EBITDA grew at 0.5x per annum in the last 5 years.

Gooch & Housego has no short term refinancing risk: cash is higher than short term debt (1,040.8%).

Valuation and dividends

The company's trades at EV/EBITDA 18.9x and P/E 80.6x.

Financial and operational results

FY ended 30 Sep 2020

Gooch & Housego ($GHH) key annual financial indicators

mln. £	2016	2017	2018	2019	2020	2020/2019
P&L
Revenue	86.1	112.0	124.9	129.1	122.1	-5.5%
Gross Profit	32.3	46.1	50.1	44.9	39.2	-12.6%
SG&A	17.9	26.4	31.6	30.1	26.1	-13.3%
EBITDA	14.8	19.3	17.6	17.3	16.9	-2.4%
EBIT			10.8	8.4
Interest expence			0.7	2.5
Tax			2.9	2.2
Net Income	7.0	8.9	7.2	3.8	3.8	0.6%
Stock Based Compensation			0.7	0.2
Balance Sheet
Cash	23.2	26.4	19.4	17.5	19.7	12.7%
Inventory			25.9	33.3
Accounts Payable			25.3	22.7
Short Term Debt	0.0	0.0	0.1	0.1	1.9	2,362.3%
Long Term Debt	11.5	11.5	30.0	31.7	32.6	2.7%
Cash flow
Capex	9.7	5.8	5.8	5.8	5.5	-5.1%
Dividends			3.0	3.0
Ratios
Revenue growth	9.3%	30.2%	11.5%	3.4%	-5.5%
EBITDA growth	-4.8%	30.3%	-8.9%	-1.8%	-2.4%

Gross Margin	37.5%	41.1%	40.1%	34.8%	32.1%	-2.6%
EBITDA Margin	17.3%	17.3%	14.1%	13.4%	13.8%	0.4%
EBIT Margin			8.6%	6.5%
SG&A, % of revenue	20.8%	23.6%	25.3%	23.3%	21.4%	-1.9%
SBC, % of revenue			0.5%	0.1%
Net Income Margin	8.2%	7.9%	5.8%	2.9%	3.1%	0.2%
CAPEX, % of revenue	11.3%	5.2%	4.7%	4.5%	4.5%	0.0%

ROIC	10.8%	12.1%	8.3%	5.7%	4.1%	-1.5%
ROE	8.4%	9.4%	6.9%	3.4%	3.3%	-0.0%
Net Debt/EBITDA	-0.8x	-0.8x	0.6x	0.8x	0.9x	0.0x
Interest expence / Average debt			3.4%	8.0%
People
Insider ownership			0.4%	0.4%
Employees			866	964
Revenue/Employee, th. £			144	134

Peers in Electronic & Electrical Equipment

Below we provide Gooch & Housego benchmarking against other companies in Electronic & Electrical Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Univision Engineering ($UVEL)	-	24.0%	16.6%	154.3%	-24.6%
Dewhurst ($DWHA)	2.6%	12.2%	3.1%	3.6%	-
Thorpe(F.W.) ($TFW)	-	18.6%	4.0%	0.9%	2.4%
Zytronic ($ZYT)	-0.8%	8.6%	-2.6%	-9.8%	-
Lpa Group ($LPA)	31.7%	4.9%	24.5%	-30.2%	-
Median (6 companies)	-1.2%	8.9%	3.1%	-4.4%	-11.1%
Gooch & Housego ($GHH)	-	30.2%	11.5%	3.4%	-5.5%

Top companies by Gross margin, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Image Scan Hldgs ($IGE)	42.3%	38.3%	47.5%	54.1%	-
Thorpe(F.W.) ($TFW)	43.8%	44.0%	46.8%	45.5%	44.1%
Zytronic ($ZYT)	42.8%	41.1%	37.0%	33.8%	-
Univision Engineering ($UVEL)	32.3%	34.3%	32.5%	22.5%	19.4%
Lpa Group ($LPA)	29.3%	28.2%	25.4%	22.3%	-
Median (5 companies)	31.8%	32.2%	37.0%	33.8%	31.8%
Gooch & Housego ($GHH)	37.5%	41.1%	40.1%	34.8%	32.1%

Top companies by EBITDA margin, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Thorpe(F.W.) ($TFW)	22.5%	21.3%	22.0%	22.2%	19.1%
Zytronic ($ZYT)	25.6%	28.8%	23.7%	20.6%	-
Dewhurst ($DWHA)	13.4%	13.6%	14.2%	14.6%	-
Univision Engineering ($UVEL)	3.7%	9.8%	13.5%	12.9%	7.1%
Lpa Group ($LPA)	9.3%	11.6%	9.9%	2.8%	-
Median (6 companies)	8.3%	9.8%	13.9%	13.8%	13.1%
Gooch & Housego ($GHH)	17.3%	17.3%	14.1%	13.4%	13.8%

Top companies by CAPEX/Revenue, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Dewhurst ($DWHA)	1.9%	1.8%	2.1%	9.3%	-
Thorpe(F.W.) ($TFW)	2.9%	5.1%	5.5%	6.2%	6.2%
Zytronic ($ZYT)	1.8%	2.1%	1.2%	2.5%	-
Lpa Group ($LPA)	6.0%	7.3%	1.8%	2.0%	-
Univision Engineering ($UVEL)	0.7%	0.5%	0.7%	0.9%	0.4%
Median (6 companies)	1.7%	1.6%	1.3%	2.3%	3.3%
Gooch & Housego ($GHH)	11.3%	5.2%	4.7%	4.5%	4.5%

Top companies by ROIC, %


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Univision Engineering ($UVEL)	2.1%	7.8%	12.0%	25.7%	5.9%
Thorpe(F.W.) ($TFW)	18.5%	19.0%	18.1%	16.3%	12.2%
Dewhurst ($DWHA)	24.6%	24.1%	18.9%	14.1%	-
Zytronic ($ZYT)	18.1%	20.9%	15.1%	11.1%	-
Lpa Group ($LPA)	13.4%	15.9%	13.8%	-1.2%	-
Median (6 companies)	9.4%	15.3%	15.1%	12.6%	9.0%
Gooch & Housego ($GHH)	10.8%	12.1%	8.3%	5.7%	4.1%

Top companies by Net Debt / EBITDA


Top 5	FY2016	FY2017	FY2018	FY2019	FY2020
Lpa Group ($LPA)	1.3x	1.1x	0.7x	4.5x	-
Univision Engineering ($UVEL)	-7.6x	-2.5x	-1.3x	-1.0x	-0.0x
Thorpe(F.W.) ($TFW)	-0.9x	-1.1x	-1.2x	-1.3x	-2.0x
Dewhurst ($DWHA)	-2.6x	-2.5x	-1.2x	-2.1x	-
Zytronic ($ZYT)	-2.2x	-2.1x	-2.8x	-3.2x	-
Median (5 companies)	0.4x	-0.5x	-1.2x	-1.3x	-1.0x
Gooch & Housego ($GHH)	-0.8x	-0.8x	0.6x	0.8x	0.9x

Gooch & Housego stock price chart

Gooch & Housego financials

mln.	FY2013	FY2014	FY2015

Revenue	63.252	70.056	78.702
EBITDA	13.356	9.364	15.591
Net income	6.192	5.399	7.459
CAPEX	2.032	1.909	3.053
Debt	8.839	8.408	5.228
Cash	14.558	17.094	22.556

About Gooch & Housego

Gooch & Housego plc researches, designs, engineers, and manufactures photonic systems, components, and instrumentation for applications in the aerospace and defense, industrial, life sciences, and scientific research sectors. The company operates through four segments: Aerospace & Defence, Life Sciences, Industrial, and Scientific Research. It offers acoustic products, including beam deflectors, fiber-coupled devices, frequency shifters, model lockers, modulators, multi-channel modulators, pulse pickers and cavity dumpers, Q-switches, RF drivers, tunable filters, and accessories; crystal optics, such as LN wafers, nonlinear optics, lithium niobate, and wave plates; and fiber optics, such as fused fiber optic components, fiber coupled AOM, fiber optics assemblies, booster erbrium-doped fiber amplifiers, single mode pump lasers, multi mode pump lasers, high speed 20GHz detectors, DFB laser modules, DFB and DBR lasers, laser packaging, and benchtop laser controllers. The company also provides electro-optic products comprising BBO lightgate, CdTe IRX, KD*P, and aperture pockels cells; EO Q-switch drivers; lithium niobate Q-switches; and pockels cell alignment for single pass systems. In addition, it offers life science and instrumentation products, including CR-100 and CR-200 tristimulus colorimeters/photometers, detectors, LMK imaging photometer systems, integrating spheres, precision constant current sources, radiometers/photometers, diffuse and specular reflectance standards, spectral imaging and synthesis products, spectral irradiance and illuminance standards, spectral radiance and luminance standards, and spectroradiometers. Further, the company provides precision optics, optical components, and optical assemblies. It operates in the United States, continental Europe, the United Kingdom, and the Asia Pacific. Gooch & Housego plc was founded in 1948 and is headquartered in Ilminster, the United Kingdom.