A Better World
with Photonics
Gooch & Housego PLC
ANNUAL REPORT 2023
Welcome
1
Contents
Strategic Report | 2–91
4 Investment Case
6 Highlights
8 Our Markets
12 Our Products and Capabilities
16 Chairman’s Statement
20 Our Business Model
22 Our Key Performance Indicators
25 Chief Executive Officer’s Statement
28 Q&A with Charlie Peppiatt
36 Acquisitions
42 Our Strategy
48 Operations Review
60 Financial Review
66 ESG Report
82 S172 Statement
88 Principal Risks and Uncertainties
Governance | 92–117
94 Board of Directors
Financial Statements | 118–181
120 Independent Auditors’ Report
128 Group Income Statement
129 Group Statement of
Comprehensive Income
130 Group Balance Sheet
131 Group Statement of Changes in Equity
132 Group Cash Flow Statement
133 Notes to the Group
Cash Flow Statement
135 Notes to the Group
Financial Statements
164 Company Balance Sheet
165 Company Statement of
Changes in Equity
166 Company Cash Flow Statement
167 Notes to the Company
Cash Flow Statement
168 Notes to the Company
Financial Statements
96 Executive Management Team
Shareholder Information | 182–191
98 Corporate Governance
184 Company Information
102 Directors’ Report
185 Expected Financial Calendar
106 Audit Committee Report
186 Notice of Annual General Meeting
109 Nomination Committee Report
110 Remuneration Committee Report
2
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Strategic
Report
STRATEGIC REPORT
3
2–91
4 Investment Case
6 Highlights
8 Our Markets
12 Our Products and Capabilities
16 Chairman’s Statement
20 Our Business Model
22 Our Key Performance Indicators
25 Chief Executive Officer’s Statement
28 Q&A with Charlie Peppiatt
36 Acquisitions
42 Our Strategy
48 Operations Overview
60 Financial Review
66 ESG Report
82 S172 Statement
88
Principal Risks and Uncertainties
4
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Why G&H is
the preferred
choice for
our investors
Why G&H is
the preferred
choice for
our investors
STRATEGIC REPORT INVESTMENT CASE
5
Revenue
£148.5m
Adjusted profit
before tax
£9.6m
Net debt
£31.7m
New products
57
Order book
£124.1m
A Clear Strategy
We have a clear strategy that sets out our path to mid-teen returns in the
medium term. We are investing to support the transformation of G&H to
become an innovative customer focused technology company.
Leading Products
and Technology
Our products sit at the heart of some of the most complex photonics
systems in the world. Our engineers are experts in their field, able to create
value by solving our customers’ most demanding product challenges.
Attractive Markets
Photonics is at the forefront of global innovation and the new frontiers of
technology. The products and services that our Group provides underpin
many of the world’s mega-trends. We are well-placed in markets that have
attractive long-term growth characteristics.
Well-Established
Customer Positions
Our customers recognise us for providing high quality, technically superior
products and services. We build long term customer partnerships by
a disciplined focus on our operational execution and by deploying our
engineers to work closely with our customers on the development of their
next generation systems, securing us long-term programme positions and
recurring revenues.
Diversified Revenues
We offer a balanced portfolio of products and services to the Industrial,
A&D and Life Sciences markets. This provides the Group with natural
protection against individual market cyclicality. Many of our markets
contain high quality and compliance hurdles, helping to make our existing
position in those markets very defensible.
State-of-the-Art Facilities and
a Cost-Effective Supply Chain
We operate from well-invested production facilities enabling us to achieve
the high levels of quality and precision that few of our competitors can
match. We have also developed a supply chain that now has the capacity
to produce a greater proportion of the Group’s revenue on a fully
subcontracted basis, supporting the Group to provide additional volumes
at enhanced returns.
Financial Strength
We have a strong balance sheet and access to financial resources,
meaning we can invest both organically and through acquisitions
to support the growth of the group.
Image: Alex Knight/Unsplash 6
Highlights
For the year ended 30 September 2023
Revenue (£m)
£148.5m
2022 £124.8m
Adjusted profit before tax (£m)*
£9.6m
2022 £8.1m
Adjusted basic earnings per share (pence)*
31.3p
2022 27.2p
Statutory profit/(loss) before tax (£m)
£5.0m
2022 (£2.3)m
Basic earnings/(loss) per share (pence)
16.1p
2022 (8.0)p
Total dividend per share (pence)
13.0p
2022 12.6p
Net debt excluding IFRS16 (£m)
20.9m
2022 £12.8m
Net debt (£m)
£31.7m
2022 £19.1m
* Adjusted figures exclude the amortisation of acquired intangible assets, impairment of goodwill
and acquired intangible assets, non-underlying items being site closure costs, costs of acquisitions
and restructuring costs, together with the related tax impact. A reconciliation of adjusted figures
to reported figures is shown on page 63.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT HIGHLIGHTS
7
FY2023 has been a year of strong growth for G&H,
reflecting the significant improvements that have
been made in operational output.
While mindful of the increasingly uncertain
macroeconomic and geopolitical landscape, G&H
remains well-positioned with a robust pipeline across
all our end markets, and we have a fully deployed,
clear new strategy to deliver sustainable profit growth.”
Charlie Peppiatt, CEO at G&H
Strategy
A new strategy launched focusing
on four pillars of People, Self Help,
Technology and Investment to
deliver mid-teen return on sales
over the mid-term.
Profit
Adjusted operating profit up
28.0% to £11.3m (FY2022: £8.9m).
Reported profit before tax up to
£5.0m (FY2022: loss of £2.3m).
Acquisitions
The acquisitions of GS Optics and
Artemis completed during the year.
The integration of both businesses
into the Group is progressing well.
Dividend
Full year dividend of 13.0p
(FY2022: 12.6p) reflecting the
Board’s confidence in the
growth potential of the Group.
Revenue
Up 19% or 13.6% on an organic,
constant currency basis to
£148.5m (FY2022: £124.8m).
Order Book
Order book returning to normalised
levels at £124.1m (FY2022: £147.7m).
Book-to-bill ratio in the second
half of 1.04x.
Debt
Net debt increased to £31.7m
(FY2022: £19.1m) of which bank debt
was £20.9m (FY2022: £12.8m) reflecting
investment in acquisitions. Group
leverage remains comfortable at 1.1x.
Outlook
The Group is well-positioned in
structurally growing markets. Our
order book gives us good visibility
for FY2024, and we are confident
we will deliver further profitable
growth in the coming year.
Image: Karsten Wurth/Unsplash
8
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Our
Markets
Our Purpose
Photonics is the enabling technology that
underpins a trillion-dollar end market.
Photonics technology relies on the
transmission, modulation or amplification
of photons, the basic unit of light.
Thanks to significant size, weight
and power advantages, the shift
from electronics to photonics is
accelerating, transforming the
fields of manufacturing, aerospace,
communications and medicine.
photonic hardware and enable
leading organisations all over
the world to deliver tailored,
innovative solutions in Industrial,
Telecommunications, Aerospace
& Defence and Life Sciences.
Through innovative technology
development, robust new product
introductions and close customer
interaction, we provide specialist
At G&H we are using our skills
and capabilities to make
a better world with photonics.
Regional Revenue
America
Europe
Rest of World
£59.3m
£62.1m
£27.1m
Image: Alin Corneliu/Unsplash STRATEGIC REPORT OUR MARKETS
9
Industrial
G&H is recognised as a leading provider of
advanced optics, fibre optics, acousto-optics,
and electro-optics for demanding applications
in industrial lasers, semiconductor equipment,
fibre-optic subsea networks, and optical sensing
and metrology.
G&H’s industrial optics were an enabling
technology when lasers first appeared in
electronics micro processing applications, and we
have helped lasers become the near universal tool
they are today for cutting, drilling, trimming, and
surface treatment of any kind down to the micron
level. Our acousto-optic modulators, Q-switches,
electro-optic Pockels cells, RF drivers, and
precision optics continue to set the standard
for accuracy, size, and power.
G&H’s components are at the heart of today’s most
advanced semiconductor manufacturing equipment,
maximising throughput and yield. Our products
can operate from the ultra violet up to the far
infrared range enabling UV and CO2 pulsed lasers
to operate efficiently and at high throughput. Our
Germanium and UV acousto-optical modulators
are integral to modern laser tools, enabling power
stabilisation, precise and stable beam positioning,
and extremely short pulse duration.
G&H’s family of high-reliability fibre couplers are
the preferred solution for use in subsea data
cables. This market is driven by the ever-growing
global demand for bandwidth. As digitisation,
Internet of Things, augmented reality and new
emerging applications such as telepresence and
telemedicine grow, G&H optical expertise will
continue to optimise the footprint, reliability, and
bandwidth density of the fibre-optic components
on which subsea networks rely.
G&H is helping drive the rapid adoption of
lidar-based optical sensing across multiple
industrial and energy sectors ranging from
proximity sensing along oil and gas pipelines
to profiling air currents around wind turbines.
With an industry-leading portfolio of fibre-coupled
products, G&H is a recognised leader in the field.
Shortwave infrared (SWIR) imaging is increasingly
used in commercial machine vision systems. G&H
provides customers with dedicated SWIR and other
infrared lens systems. Our lenses are designed to
be compatible with the most cutting-edge sensors
and cameras and are used in applications such as
recycling sortation, food processing, and a variety
of security uses.
G&H supplies components based on electro-optic
and precision optic technology to a broad range
of big science projects including Commissariat à
l’énergie atomique et aux énergies alternatives
(CEA), the National Ignition Facility (NIF) at
Lawrence Livermore National Laboratories (LLNL),
and a number of synchrotron laboratories. At CEA
and NIF, we are supplier of many critical optical
components used in the world’s most powerful
laser systems.
10
Aerospace
and Defence
Our leadership in supporting mission-critical applications with
high-performance optical components, modules, and subassemblies
has established G&H as a preferred supplier for leading A&D
contractors around the globe. Our technology and expertise in
optical design and manufacture have helped advance programs
and missions in several key application areas.
Unmanned aerial vehicles (UAVs) and other airborne platforms
gather a greater amount of image data more quickly during
ever-longer flight times. G&H’s precision optical components
and advanced lens assemblies enable optimal field of view and
resolution for short, mid- and longwave infrared imagers, making
them critical elements in A&D platforms used for intelligence,
surveillance, and reconnaissance (ISR) missions. Our IR lens
assemblies are also used in directed energy weapons.
The speed and precision that photonics technology enables are
instrumental for the directed energy systems employed in drone
and missile defence. With decades of close collaboration with prime
defence contractors and avionics manufacturers, G&H brings the
exacting design and manufacturing expertise required for the fibre
optics, electric-optic modulators, and sights and windows that help
ensure directed energy systems perform reliably.
G&H is at the forefront of inter-satellite and satellite to ground
communication. Space-qualified optical components, lens
assemblies, and subsystems from G&H deliver consistently
excellent connectivity and bandwidth for satellite-based laser
communications and sensing.
We are a trusted provider of periscopes and sighting systems. G&H
is focusing on increasing situational awareness in the battlefield
and the protection of life through the introduction of advanced
camera sensors and visible/IR image fusion.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
STRATEGIC REPORT OUR MARKETS
11
Life
Sciences
G&H’s optical component designs have helped advance the
performance and reliability of life science instrumentation for
microscopy, medical diagnostics, biomedical imaging, and laser
surgery. We are recognised as a leading provider of advanced
optics, fibre optics, acousto-optics, and electro-optics for diagnostic
and therapeutic applications in life sciences worldwide.
We work with leading laser system OEMs and medical equipment
manufacturers to optimize patient outcomes in a broad range of
surgical applications, including prostate surgery, scar correction,
treatment of cataracts, removal of freckles, moles, and tattoos,
wrinkle reduction, and teeth whitening. Our optics also provide
surgical lasers with the precision and reliability needed for
cardiovascular procedures.
G&H has helped drive the development of optical coherence
tomography (OCT) from the technology’s start. Today we support
the world’s leading OCT systems manufacturers with components
and OEM sub-systems. Our unique ability to offer everything from
fibre-optic components to subassemblies to full optical systems with
embedded controls allows us to meet the demand for virtually any
system design. The result for OCT instrument makers is higher-
performing, more cost-effective, and more reliable optical engines.
The high performance of our fibre components such as bandwidth
and spectral flatness enable clearer image resolution, deeper
penetration and hence improved diagnoses, making a better
world with photonics.
Through our G&H | ITL business, we offer end to end design and
manufacturing services for medical devices, invitro diagnostics,
and laboratory instruments. Together with our customers we
create and deliver breakthrough technologies for the healthcare
and life science industries, developing new life saving medical
technology and instruments.
12
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Our Products
and Capabilities
Leading Photonics Technology
Building on its proud history that dates
back 75 years, Gooch & Housego remains
at the forefront of photonics technology.
Our expertise in optical systems, subsystems
and components extends from research
through the development of prototypes to
volume manufacturing.
Our commitment to working in partnership with
our customers enables us to deliver the highest
quality photonic devices and optical systems.
STRATEGIC REPORT OUR PRODUCTS AND CAPABILITIES
13
Acousto-Optics
G&H has been a leader in acousto-optic (AO) device design and
manufacturing for over 35 years.
Many of our acousto-optic and electro-optic products are
manufactured using our own in-house grown materials such as
Tellurium Dioxide. Through advanced orienting, sawing, grinding,
and lapping technologies, all are built to the highest standards.
G&H’s components are at the heart of today’s most advanced
semiconductor manufacturing equipment, maximising
throughput and yield. Our Germanium and UV acousto-optic
modulators are integral to modern laser tools, enabling power
stabilisation, precise and stable beam positioning, and extremely
short pulse duration.
Advanced
Electro-Optics
Using proprietary crystal growth, fabrication, and polishing
techniques, G&H produces a wide range of electrooptic
devices including in-house grown potassium di-deuterium
phosphate (KD*P) Pockels cells. These Pockels cells are used
extensively in medical lasers for skin and other treatments,
leading to effective procedures for patients with less discomfort
and faster recovery times. We also grow beta-barium borate
(BBO), Cadmium Selenide (CdSe), cadmium sulfide, (CdS),
potassium di-hydrogen phosphate (KDP) for use in sensing
and laser-based manufacturing applications.
France’s Centre Commissariat à Energie Atomique and the
National Ignition Facility in the US both selected G&H as their
primary supplier of large crystals for their high fluence lasers
in their inertial confinement fusion programs. These laser
systems are some of the most powerful in existence as they
seek to generate energy from nuclear fusion.
14
Precision Optics
G&H produces precision optical components and assemblies for
semiconductor laser manufacturing, aerospace and defence,
medical systems, and research applications. We leverage our
expertise in the optical and mechanical properties of materials,
coupled with the capability to manage all stages of component
manufacturing, to deliver products of the highest quality with
precise optical finishes.
Our custom lenses and housed subassemblies are applied in
transmission and imaging. Our ring laser gyro products are utilised
by every commercial airline globally. Furthermore, G&H supplied
polished optics for NASA’s Mars Curiosity mission.
Operating from multiple chambers in the UK and the US, we provide
a comprehensive range of optical coating capabilities, leveraging
them to enhance products across various segments of our business.
Our acquisition of Artemis Optical added to our capabilities in the
field of infra-red and near infra-red filter coating, strengthening our
vertical integration in laser protection filters. Our engineers are
continuously researching the performance characteristics of new
coating materials and integrating the results into our modelling
software to optimise the designs for customers’ applications.
Fibre Optics
Our active and passive fibre optic components and sub-systems
offer the performance and reliability required for some of the
most demanding applications in the world. G&H’s fibre optic
modules are found in the world’s most advanced semiconductor
manufacturing plants and in the harshest of environments,
orbiting our planet.
We assist customers throughout the entire system development
process, leveraging our expertise in integrating end-to-end fibre
optic systems and designing for challenging environments.
G&H’s products facilitate the transmission of terabits of data
across continents through subsea data cables. Additionally,
our fibre-based products play a crucial role in ensuring the safe
and efficient operation of wind turbines through wind sensing,
infibre linear asset monitoring, and perimeter detection. G&H’s
optical amplifiers are at the heart of new systems that enable
satellite-to-satellite, satellite-to-ground communication, and on
board optical sensing. These products will increasingly replace
traditional radio frequency-based space communication systems.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT OUR PRODUCTS AND CAPABILITIES
15
Imaging and
Sighting Systems
Our optical systems group is recognised as an industry leader,
delivering cutting-edge lens assemblies, integrated imaging systems,
and advanced direct-view and electro-optic periscopes. We cater
to a diverse customer base across a wide range of applications.
We work with system integrators worldwide, providing
high-performing products of exceptional quality and value.
The G&H | StingRay range of lens assemblies and integrated
optical systems is renowned for its high resolution, world-class
design, and proven capability to deliver mission-critical imaging
in the most challenging environments, including space.
We design and manufacture unity vision periscopes, sights,
drivers vision aids, and related equipment and vision systems
for armoured fighting vehicles (AFVs) such as tanks, infantry
fighting vehicles, and armoured personnel carriers. Our newly
developed G&H | Kent Embedded Imaging Periscope (EIP) is being
developed for the Challenger 3 platform upgrade. Our optical
systems group is actively involved in the design of laser-directed
energy weapons and has successfully delivered prototype
systems to major UK programs.
Polymer Optics
The acquisition of GS Optics brought a new enabling
technology to the Group in the field of polymer optics.
G&H | GS Optics is recognised as one of the world’s
leading manufacturers of custom injection moulding
for optics that adds the dimension of high volume
optics manufacturing in G&H. We work with customers
to provide them polymer optics designed specifically
for improving their product competitiveness.
As a custom optics manufacturer, G&H | GS Optics
produces custom injection moulding for aspheric lenses,
freeform lenses, and mirrors, as well as Fresnel and
diffractive optics. The business possesses in-house
capabilities to create custom-designed diamond-turned
and injection-moulded prototypes, along with thin film
optics and reflective coatings. These offerings cater to a
diverse range of markets, including consumer, medical,
LED lighting for instruments, as well as military and
civilian night-vision and visible-range sighting products.
16
Chairman’s
Statement
GARY BULLARD
Group Overview
I am very pleased with the Group’s performance in FY2023.
Under the leadership of our new Chief Executive, Charlie Peppiatt,
significant progress was made in improving the operational
performance of the business. Through focused actions we were
able to fill many of the open roles created by the record order
book secured by the Group. As a result, we improved our on-time
delivery performance and reduced our lead times.
Along with the operational improvements delivered from our
own facilities, our suppliers also contributed materially to the
significant level of on-time delivery improvement compared with
the prior year. In particular our Asian contract manufacturing
partner provided us with significant additional capacity for many
of the Group’s acousto-optic products. We are building upon this
firm foundation by qualifying them for the manufacture of some
of the Group’s fibre optic units, and I am pleased to report that
during the year and after the long qualification programme that
is required for such high-reliability products, they achieved their
first deliveries of fused fibre couplers direct to our customers.
Thanks to these measures the Group was able to increase its
revenue by 19.0% compared with the prior year and deliver a
28.0% increase in underlying operating profit.
Strategy Refresh
In June 2023 the team presented the results from a thorough
refresh of the Group’s strategy. Despite the impact in recent
years of growing competition in some of our markets on the
Group’s financial performance, we are well-positioned in fast
growing markets that can offer the possibility for superior returns.
Whilst the profitability of the Group over the past few years has
been disappointing, some of which has been driven by our own
operational shortcomings, our new strategy sets out a path to
deliver a return to sustainable margin growth by positioning
G&H in our growing end markets as an innovative customer
focused technology company.
There will be a relentless focus on building long-term partnerships
with our customers through both superior operational
performance and by providing them with our new and exciting
technologies that address their most complex photonic needs.
As an enabler we have refreshed our product development
roadmaps to ensure we focus our resources on fewer activities
thereby accelerating the time to market for the developments
that offer the best returns.
Our suppliers will have an important part to play in helping us
deliver on this strategy. We have been clear that we expect to
increase the proportion of the Group’s revenues that will come
from product fully outsourced to our contract manufacturing
partners. To achieve this we have invested further resources
in our supply chain teams and have permanently located G&H
employees in our main contract manufacturing supplier’s facilities
to ensure this partnership is successful.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT CHAIRMAN’S STATEMENT
17
The success of the strategy depends upon the
skills and expertise of my colleagues in G&H. I am
always extremely proud of their hard work and
dedication. During the recent difficult times they
have risen to every challenge.”
18
We have been recognised by the rating agency MSCI, who
have now placed us in the highest scoring range relative to
our global peers for our corporate governance practices.”
Ultimately the success of the strategy depends upon the skills
and expertise of my colleagues in G&H. I am always extremely
proud of their hard work and dedication. During the recent difficult
times they have risen to every challenge. The significant progress
made by the Group during the year would not have been possible
without them. I am also delighted that thanks to the Group’s
growth we have been able to offer new, high quality employment
opportunities to colleagues at all stages in their careers.
Focused Investment
In delivering the Group’s strategy, the Board is focused on the
efficient use of capital. We have continued to invest in R&D to
embed ourselves in our customers’ next generation programmes
but we are also prepared to make careful use of the balance sheet
to support inorganic growth. We were delighted to be able to
complete the acquisitions of both G&H | GS Optics and Artemis
during the year. The addition of both companies to the G&H family
provides the opportunity to drive significant synergies and is
aligned to key areas of focus outlined in our new strategy. The
integration of both companies into G&H is progressing well and
I was pleased to see during my recent visit to G&H | GS Optics’
facility in Rochester the additional space that we have taken
on that campus to accommodate our G&H | ITL medical and
diagnostics device production activities in the US.
The Environment
The Group’s products are playing their part in the migration to
a more sustainable and healthier world. Our medical diagnostic
products help with the earlier diagnosis of disease and illness
ultimately leading to better patient outcomes whilst our sensing
products are integral to the efficient generation of clean,
renewable energy. We are committed to achieving net zero for
our scope 1 & 2 emissions by 2035 and made further significant
steps towards that target in the financial year. Our carbon
intensity measure, which records our volume adjusted emissions,
reduced by 33.2%. With the development of the renewable energy
market in the US, we are now able to make progress in migrating
our US sites to purchase their energy from renewable sources
following the lead given by our UK sites where all of our purchased
electricity now comes from renewable sources.
Board
We were delighted to welcome Susan Searle to join the Board as
a new non-executive director in April 2023. Susan brings strong
experience of commercialising new technologies as well as a broad
base of other expertise including ESG matters. I am sure she will
make a strong contribution to the further growth of the Group.
Recognising the importance the Board places upon ensuring
the long-term sustainability of the Group we have established
a new Sustainability Committee of the Board. Susan will chair
this committee which will focus on the integration of the Group’s
financial objectives with its social and environmental ambitions.
We will also explore the establishment of targets around some of
the Group’s scope 3 emissions.
As a Board we take our governance responsibilities very seriously,
so I was delighted to see further progress in this area when the
rating agency MSCI placed us in the highest scoring range relative
to our global peers for our corporate governance practices.
Dividend
Given the progression of the Group in the year and the long-term
positive outlook for the business underpinned by the work
completed during the year to refresh the Group’s strategy, the
Board is proposing a final dividend of 8.2 pence per share for
approval at the Company’s Annual General Meeting on 21 February
2024, giving a total of 13.0 pence for the year. Payment of the
dividend will be made on 23 February 2024, to shareholders on
the register as at 19 January 2024. The Board is committed to
growing the level of dividend cover.
Outlook
The strategic objectives that support the return of the Group
to mid-teens profitability over the mid-term are in place and
already delivering benefits. Our customers recognise us for the
quality of our products and the skills of our people. The Group is
well-positioned in structurally growing markets. Our order book
gives us good visibility for FY2024, and we are confident we will
deliver further profitable growth in the coming year.
We also recognise the importance of supporting the communities
in which we operate. As well as providing high quality, skilled jobs
we encourage our employees to support local charities, often
matching with G&H monies the amounts they raise.
Gary Bullard
Chairman
5 December 2023
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
STRATEGIC REPORT CHAIRMAN’S STATEMENT
19
20
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Our Business Model
WE’RE DIFFERENT
OUR BUSINESS
Making a better
world with photonics
G&H is a market-leading
global provider of advanced
photonic solutions.
We create sustainable value
by leveraging our expertise
to supply our world-leading
products and services to
attractive growth markets.
The quality and performance
of our components and systems
differentiates us. We work closely
with our customers to provide
them with precise, reliable and
cost-effective solutions that meet
their most demanding needs.
Attractive Growth Markets
We supply attractive growing end markets.
Geopolitical tensions are adding momentum to re-shore critical
component supply. There is significant new investment being
made in new onshore semiconductor and other laser-based
manufacturing facilities.
Developments in 5G and 6G, artificial intelligence and autonomous
machine monitoring all drive increasing needs to share data
globally, fuelling demand for our high-reliability fibre optic
telecoms products used to transmit data between continents.
The need to transmit more and more data around the world is also
driving the growth of laser-based space communication. Our fibre
optic laser amplifier modules sit at the heart of these systems.
There is growing demand for improved healthcare, especially for
early-stage diagnostics and for laser-enabled cosmetic procedures.
The Ukraine conflict has shown the utility of photonic systems
to enable precise targeting, including in the defence against
unmanned systems. Optical filters are critical on the modern
battlefield. Directed energy systems are emerging as the next
precise, low-cost defence systems.
Increasing global demand for clean, wind-generated energy drives
demand for our fibre optic sensing modules.
Unique Range of Skills
and Resources
Our talented engineering teams work in partnership with our
customers to design and produce some of the most complex
photonic subassemblies and systems in the world. Our engineers
are embedded with research organisations to help push forward
the boundaries of photonics.
We offer a complete design, engineering and manufacturing
service for our customers. We are experienced in supporting our
customers to have their end systems achieve their necessary
certifications.
We have invested to create state-of-the-art manufacturing
facilities allowing us to offer a range of capabilities that few of
our competitors can match.
We have developed a strong partnership with a contract
manufacturer that provides significant, cost-effective additional
capacity. We intend to build upon this partnership outsourcing
more of the Group’s products at an earlier stage in their product
life cycle.
We are pioneers in crystal growth techniques and the supply of
specialist crystalline materials.
STRATEGIC REPORT OUR BUSINESS MODEL
21
Competitive Advantage
We differentiate ourselves from our competitors thanks
to our industry-wide reputation for innovation and
continuous improvement.
We have an established capability to work in high product quality
and compliance markets such as A&D and Life Sciences as well
as on programmes requiring high-level security accreditations.
We have talented engineers continually developing new IP.
Our manufacturing facilities are well-invested and staffed with
skilled engineering and production teams who operate according
to consistent processes.
Our manufacturing know-how has been developed over
many years.
We uphold clear corporate values and reinforce them through
communicated behaviours, ensuring our people operate as
effectively as possible.
We effectively prioritise the deployment of our capital.
Creating Value for
our Stakeholders
Our customers – using our expertise we work closely with our
customers to solve their mostly technically challenging system
requirements. We invested £9.3m in R&D and brought 57 new
products to the market in FY2023.
Our suppliers – we deploy our own resources and expertise to
help our consolidated group of suppliers to produce as efficiently
as possible with consistent and repeatable product quality.
We spent £62m with our suppliers in FY2023.
Our employees – we invest in our employees from apprentice
level through to our most experienced engineers to ensure
they have the skills and capabilities needed to operate in our
industry-leading operations.
Our communities – we bring high quality employment to the
communities in which we operate. We are targeting net zero
scope 1 & 2 emissions by 2035. We achieved a 33% reduction
in our GHG intensity measure in the year. We support local
charities close to our facilities.
Our shareholders – medium term target of mid-teen operating
profits. Dividend for the year increased 3.2% to 13.0p.
UNDERPINNED BY
Sustainability
We work to create a long-term sustainable business for the
benefit of all of our stakeholders, support the communities
in which we operate and minimise the Group’s impact on the
environment. We are working hard to achieve our target of
being net neutral on scope 1 & 2 emissions by 2035. We have
processes in place to ensure we maintain our high standards
of business conduct. Our newly formed Board Sustainability
Committee is responsible for focusing our work in this area.
See our ESG report on page 66.
Financial Position
Our revenues are generated from markets with different
growth dynamics meaning that the Group is naturally protected
against individual market cyclicality. We are cash generative and
at 30 September 2023, we had $25.4m of undrawn committed
facilities and $10m of undrawn uncommitted funding facilities
to support the further growth of the Group.
See our financial statements from page 128.
Governance
The Board is committed to the highest standards of corporate
governance. The Group has adopted the UK Corporate
Governance Code (2018). We have received recognition of
our efforts in this area in the scoring of our governance by
external ratings agencies.
See our Corporate Governance Report on page 98.
Risk Management
We have a formal risk identification and management process
in place designed to ensure that risks are properly identified,
prioritised, evaluated and mitigated to the extent possible.
A formal group-wide risk register is maintained and approved
by the Board on an annual basis. This includes risks associated
with climate change.
See our Principal Risks and Uncertainties on page 88.
Image: Haton Sakaoen/Unsplash 22
Our Key
Performance
Indicators
KPI AND DESCRIPTION
Organic revenue growth (%)
The percentage change in revenue in the current year compared
to the prior year, excluding the effects of foreign exchange.
WHY THIS IS IMPORTANT
PERFORMANCE
2023 PERFORMANCE
We are focused on long-term organic revenue
growth as a means to create value. This metric
reflects both the health of our target markets
and our success in gaining an increasing market
share with our customers.
2023: 13.6%
2022: (3.7%)
2021: 6.4%
2020: (5.4%)
Organic revenue was 13.6% higher, excluding
foreign exchange, with significant growth achieved
across all three of our end markets. The growth
in our productive capacity achieved in the year
enabled us to deliver on our record order book.
KPI AND DESCRIPTION
Adjusted operating profit (£’m)
Operating profit adjusted to remove non-underlying items.
WHY THIS IS IMPORTANT
PERFORMANCE
2023 PERFORMANCE
Adjusted operating profit is a key measure
of the value generated from our activities.
We achieved a 28.0% increase in operating profit
in the year, reflecting a combination of growth
and our operational improvement activities.
2023: £11.3m
2022: £8.9m
2021: £13.3m
2020: £11.2m
KPI AND DESCRIPTION
Adjusted operating margin (%)
Adjusted operating profit as a percentage of revenue.
WHY THIS IS IMPORTANT
PERFORMANCE
2023 PERFORMANCE
Adjusted operating profit margin measures
our ability over time to generate value from
our products and capabilities. It is impacted
by our actions to both increase revenue and
optimise our cost base.
2023: 7.6%
2022: 7.1%
2021: 10.8%
2020: 9.2%
The adjusted operating margin was 7.6% reflecting
our growing revenues offset to some extent by the
additional investment made to deliver upon our
strategic objectives. In the first half of the financial
year the net impact of inflation was a headwind.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT OUR KEY PERFORMANCE INDICATORS
23
KPI AND DESCRIPTION
R&D investment
R&D expenditure as disclosed on the income statement.
WHY THIS IS IMPORTANT
PERFORMANCE
2023 PERFORMANCE
Our R&D investment enables us to introduce new
products to the market supporting our objective
of increasing revenue and keeping us ahead of our
competitors. This measure is directly related to our
strategic priority of focused R&D investment.
2023: £9.3m
2022: £9.2m
2021: £8.1m
2020: £7.9m
We increased our investment levels in FY2023.
In the year we released another 57 products to
the market and revenues from products
contributed £26.1m of revenue in the year.
KPI AND DESCRIPTION
Adjusted operating cash flow
Cash flow from operating activities adjusted for non-underlying cash flows.
WHY THIS IS IMPORTANT
PERFORMANCE
2023 PERFORMANCE
The KPI measures the cash generated by
the Group’s trading activities. It measures
the cash generated to fund investment in
the business either through new assets
or to acquire other businesses.
2023: £18.2m
2022: £6.6m
2021: £21.9m
2020: £22.5m
We invested £7.4m in new capital for the Group.
In the second half of the financial year significant
progress was made in reducing our inventory
holdings. Despite the 13.6% organic growth in
revenue the overall investment in working capital
during the year was £2.0m
KPI AND DESCRIPTION
Safety performance
Any accident resulting in time off work.
WHY THIS IS IMPORTANT
PERFORMANCE
2023 PERFORMANCE
We are committed to the wellbeing of our
employees. This KPI measures our performance
in raising the safety standards in our facilities
and also underpins our operational performance.
None of the accidents in FY2023 were reportable.
2023: 7
2022: 8
2021: 8
2020: 11
Our safety performance remains significantly
better than the industry average. We have
conducted further Spot It, Stop It awareness
training to encourage employees highlight
potential issues before an accident occurs.
KPI AND DESCRIPTION
Carbon dioxide equivalent (tonnes)
The total amount emitted in tonnes for scope 1 & scope 2 (carbon dioxide equivalent),
with further details on the calculation method set out in the ESG Report.
WHY THIS IS IMPORTANT
PERFORMANCE
2023 PERFORMANCE
This metric measures our achievement against
our objective to reduce our carbon emission
over time and reduce the impact we have on the
environment. We are focused on making G&H a
sustainable business and have a target to be net
zero on scope 1 & 2 emissions by 2035.
2023: 3,135
2022: 3,941
2021: 5,414
2020: 5,852
All of our sites are following specific action
plans that will reduce their energy consumption.
We made good progress in sourcing more of
our purchased electricity for our US sites from
renewable sources.
24
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
While mindful of the increasingly uncertain
macroeconomic and geopolitical landscape, G&H
remains well-positioned with a robust pipeline across
all our end markets, and have a fully deployed clear
new strategy to deliver sustainable margin growth.”
STRATEGIC REPORT CHIEF EXECUTIVE OFFICER’S STATEMENT
25
Chief Executive
Officer’s Statement
Introduction
FY2023 has been a year of strong growth for G&H reflecting
the significant improvements that have been made in
operational output. This has been complemented by a
number of new customer wins and incremental business
opportunities with existing customers. The growth in
revenue and the continued strong order intake reflect
multi-year programme wins and the positive structural
trends evident in many of our end markets.
Our teams across the Group have executed
exceptionally well in a challenging environment,
given the significant supply chain and cost
headwinds, to deliver a strong trading
performance with improved profit growth in line
with expectations. Having completed my first full
year with G&H, I am pleased with the progress that
has been made across the business through the
collective hard work of the workforce which has
been harnessed more effectively through our new
strategy that was launched in the summer.
I am proud that G&H products are playing a part
in building a better, more sustainable world. Many
of our products contribute directly to the reduction
of energy consumption and the more efficient
use of materials. In our own facilities we are also
making great strides in reducing our impact on
the environment. In FY2023 we achieved a 20.5%
reduction in our emissions as we work towards our
goal of being net neutral on our scope 1 & 2
emissions by 2035.
Business Performance
Following the positive performance reported in
the first half, the Group sustained strong trading
momentum during the second half of the year
enhanced by the focused operational improvements
and capability investment over the last year. For the
full financial year 2023 G&H achieved revenues of
£148.5m, representing an increase of 19% over the
previous year (FY2022: £124.8m), or on an organic,
constant currency basis saw growth of 13.6%.
Adjusted profit before tax was £9.6m, an increase of
17.5% over last year (FY2022: £8.1m). At the same
time, we saw continued strong levels of customer
demand albeit at more normalised levels resulting
in the order book stabilising at £124.1m (FY2023
£147.7m) and positive book-to-bill ratio in the second
half of the year at 1.04x. There has been further
extension of the order book following the year end.
Strategy
Over the last year many of my first impressions
have been confirmed, that G&H is a company
with outstanding products, enormous technical
capability and highly talented people that
required greater focus on operational execution,
customer experience, employee engagement
and better prioritisation of valuable R&D
technology investment.
Following a full strategic review of the business
during the first half of the year, we introduced a
refreshed strategy across the Group in the summer.
This aims to: focus our business in the right product
development areas aligned to customer-led growth
drivers, enhance the ease of doing business with
G&H to ensure long-term profitable customer
partnerships, and focus on disciplined, superior
operational execution. This approach is designed
to avoid repeating the manufacturing and supply
chain problems of the recent past.
Our new strategy is now focused on delivering
sustainable margin growth and transforming
G&H to become an ‘innovative customer focused
technology company’ delivered responsibly by
making a ‘better world with photonics’. We seek to
ensure that G&H becomes and remains the ’first
choice’ for all our stakeholders including our
employees, our customers, our shareholders, our
eco-system partners or the communities where we
operate. We will offer differentiated performance
through the four pillars of our strategy centred
around firstly, our people by establishing dynamic
26
high-performance teams and a purpose-led culture. Secondly,
through self-help activities to deliver exceptional customer service
and superior operational execution. Thirdly, through value creation
from our technology and photonics expertise and finally by focused
investment, both organic and inorganic, to accelerate accretive
growth.
Acquisitions
The Group’s new strategy has identified a path to mid-teens returns
over the medium term that includes benefits from our ‘portfolio’
achieved through addressing non-performers in combination with
pursuing ‘speed to value’ acquisitions. During 2023 I was delighted
to be able to announce the completion of the back-to-back strategic
acquisition of GS Optics and Artemis Optical. These two acquisitions
marked a significant milestone and alignment with G&H’s strategic
vision for growth through a greater focus on adding value through
the transition from complex photonics components to a sub-system
or full system solution by targeting two businesses that enhance
our fuller photonics systems offering in A&D, advanced industrial or
Life Sciences markets. Our new strategy has a greater focus on
filling gaps that we have in coating, complex systems assembly,
new materials and specifically our Life Sciences footprint in North
America. Both acquisitions are already proving an excellent fit in
terms of our commitment to precision, innovation and customer
focus, confirming their potential to support the growth of the Group.
Our markets
Industrial demand continued to be strong, especially the
semiconductor and industrial laser markets, where underlying
market growth was complemented by very good uptake of new
G&H products launched into those markets. Demand for our
high-reliability fibre couplers remained robust, with the use of
those products in the growing satellite communications market
complementing the long-standing undersea cable business.
The Life Sciences business performed well and we saw continued
growth in demand for our products used in medical lasers and
our medical diagnostic products. A cancer care product initially
designed by our customer and then productionised by our
engineering team migrated through regulatory approvals and
into production during the year and we expect to see further
growth from this product in FY2024.
Volumes in our Aerospace & Defence markets grew significantly as
a result of improved productive capacity at several of our sites and
a number of projects moving into production phase. Our imaging
and sighting systems business for armoured vehicles and UAVs
continues to progress well with a number of multi-year new
programme wins during FY2023 where the conflict in Ukraine is
fuelling increased demand and greater urgency of supply.
Following the transfer of our acousto-optic products from our
Ilminster facility to our Asian contract manufacturing partner, we
have now qualified and successfully transferred the manufacture of
some of our hi-reliability fibre coupler business to that same partner.
With the appointment of a new VP of Supply Chain and Contract
Manufacturing during FY2023, we are looking to accelerate the
transfer of further opportunities to outsource several other products,
where technological sovereignty is not a differentiator, building
upon the successful partnership that we have now established.
We have continued to invest in our technology roadmaps albeit it
with a greater focus following the recent strategic review and our
R&D teams are working closely with many of our customers on their
next generation products. New products contributed a record
£26.1m of revenue in FY2023 (FY2022: £17.9m).
The Group retained high levels of inventory during FY2023, similar
to last year, as a risk reduction exercise given the ongoing difficult
supply chain environment. Although this is expected to improve in
FY2024 we don not expect it to return fully to pre-pandemic levels
in the next 12 months.
This combined with the funding of the two acquisitions resulted in
net debt excluding lease liabilities increasing to £20.9m from
£12.8m. Our leverage as measured for our banking covenant
stands at 1.1x (2022 0.7x), which along with available committed
and uncommitted bank facilities of $35.4m places G&H in a strong
position to pursue our strategic goals.
Research and Development (R&D)
G&H continues to work closely within the global photonics
ecosystem and with a number of key partners to develop their
next generation products. During FY2023 we introduced 57 new
products (FY2022: 54) and delivered £26.1m of revenue (FY2022
£17.9m) from new products. Following our strategic review, we are
refocusing and prioritising our R&D efforts and investment behind
the following seven vital few areas:
• Expansion of acousto-optic technologies into semiconductor
and EUV.
• New medical laser technologies and applications.
• Advanced fibre technology supporting submarine networks.
• Imaging and sighting systems.
• Added value around our precision optics and optical coatings
capability.
• Moving up the value chain in fibre optics with a focus on sensing,
modules and LiDAR.
• Medical diagnostics and biophotonic IVD solutions.
These projects are expected to contribute £50m of incremental
margin accretive revenue over the plan period.
Corporate Responsibility
The Board is accountable to its shareholders and is committed to
the highest standards of corporate governance. To this end the Group
has adopted the UK Corporate Governance Code (2018). In order to
ensure the Group is meeting the most up-to-date standards, regular
reviews of policy are held by the relevant committees of the Board of
Directors. During the year the Board undertook a self-assessment
to identify opportunities for improvement and incorporate a
greater focus on ESG. We were pleased to welcome Susan Searle
to join the Board during the year with her wealth of experience in
many of the markets in which we operate. Susan also assumed the
role of Chair for our newly introduced Sustainability Committee.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT CHIEF EXECUTIVE OFFICER’S STATEMENT
27
increases, cost inflation continues to impact the business.
Nevertheless we expect to be able to offset cost base inflation
through pricing actions in the coming financial year.
While mindful of the increasingly uncertain macroeconomic and
geopolitical landscape, G&H remains well-positioned for growth with
a robust pipeline across all our end markets. The business will invest
to ensure G&H can capitalise on the accelerating deployment
of photonics technologies into continuously expanding areas of
the Industrial, Life Sciences, Aerospace and Defence markets
underpinning the future growth potential of the Group.
I am confident we will build on the progress made with our financial
and operational performance in FY2023 and, supported by the the
clear direction from our new strategy, progress to become a more
resilient and agile higher margin business over the coming years for
all our stakeholders and realise our clear vision of ‘a better world
with photonics’.
Charlie Peppiatt
Chief Executive Officer
5 December 2023
G&H is committed to creating a safe, engaging, diverse and
inclusive place to work for the Group’s employees and all
stakeholders. We continue to establish a culture that proactively
works towards reducing harm and promotes equality, diversity
and inclusion across the company. The Group remains focused on
providing equal employment opportunities for all and aims to
improve diversity at all levels of the organisation. Our recruitment
partners have been instructed to ensure that they include women
in all shortlist applications and we are actively engaged with
encouraging International Women in Engineering.
G&H is committed to conducting our business in an environmentally
responsible and sustainable manner. With the appointment of our
new non-executive director, we have established a Sustainability
Committee responsible for monitoring the Group’s achievement
against its ESG targets. We are investing in order to generate our
electricity in a sustainable manner and to reduce our overall
energy usage. Each of our sites has an energy reduction plan that
it is working to. In the year we reduced our scope 1 & 2 carbon
emissions by 20.5%, a major step forward in achieving our target
of being net neutral on this measure by 2035. We were also
pleased to see two sites, Ilminster and Torquay, join our Fremont
site with certification to the environmental ISO 14001 standard. As
part of our new strategy, we have deployed a roadmap to roll this
same initiative out across all our manufacturing sites by 2027. The
Executive Directors and senior leadership team all have specific
environmental management and carbon reduction goals in their
remuneration schemes.
Outlook
FY2023 was a year of strong operational, strategic and financial
progress. We delivered excellent top line growth for the Group
through improved operational execution on our record order
book, which reflected a significant number of new customer wins,
incremental business opportunities with existing customers and
market share gains. Our teams across the Group have performed
exceptionally well in a year characterised by significant change,
ongoing supply chain issues and continued cost inflation.
At the same time, we have completed our strategic review and
deployed a clear new plan for G&H to become an innovative
customer focused technology company delivered responsibly by
making a ‘better world with photonics’ and ensuring that G&H
becomes and remains the ‘first choice’ for all our stakeholders
whether they are our employees, our customers, our shareholders,
our eco-system partners or the communities where we operate.
G&H is well-aligned with the prevailing global mega-trends, many
underpinned by the next frontier of photonics, that is driving
demand from high-growth markets.
Despite the strength of the order book across the business that
provides good visibility for FY2024, we still face some operational
and commercial headwinds in the near term. The labour markets
for talent in both the UK and US remain highly competitive leading
to ongoing supply side challenges that continue to frustrate the
recruitment of the required talent, especially in engineering and
technical positions. Global supply chain constraints continue to
persist alongside an inflationary environment for wages, material
costs and energy. Whilst price increases have been passed onto
customers in the second half of FY2023 to address these cost
28
Q&A with
Charlie
Peppiatt
CHIEF EXECUTIVE OFFICER
Q
What were your first
impressions of G&H?
During my first three months with the company, I
visited all our primary locations, spent time with the
sales, operations, engineering and site leadership
teams, met with and listened to many of the Group’s
top customers and key suppliers plus joined our
sales teams on the stand at the Medica tradeshow
in Dusseldorf last November and Photonics West in
San Francisco in January This helped form my first
impressions and initial observations of the company.
Firstly, G&H’s employees spread across sites in
the US and UK, along with our field-based sales
and support teams make up a highly dedicated,
experienced and technically competent workforce.
I was impressed with the commitment, resilience
and hard work I saw across the business. Secondly,
I was impressed by the broad range of blue-chip
customers that G&H has across the three main end
markets we serve; whether that is with defence
primes in Europe or the US, global medical device
specialists or leading industrial multinationals. It was
also clear from listening to the feedback from many
of these customers that our products are recognised
for their superior technical performance and quality,
often operating in the harshest environments.
However, it was apparent that the Group’s
operational performance over recent times has
not been at the levels required by many of our
customers related to lead time, delivery and
customer service. The company had been taking
steps to address this by strengthening the global
operations function including the appointment
of a new Chief Operating Officer during FY2022
prior to my arrival, but this area of operational
improvement needed greater focus and urgency.
The Group has well invested production facilities and
innovation labs with the right plant and equipment,
however, to deliver cutting-edge earnings accretive
growth and replace some of the historically higher
margin Q-switch business that can now be sourced
from Asian suppliers at lower cost, refocused
investment in new product development required
acceleration and greater discipline.
I observed that many elements of the company’s
previous strategy over the last seven years aimed at;
diversification into new markets, providing greater
systems content and operational excellence were
valid but execution and implementation had stalled
and on top of this challenges during the pandemic
had then ground the business to a halt in some
areas. It was clear that focusing on how we move up
the value chain through greater vertical integration
and the expansion of our photonics components
and modules offering into subsystems or more
fully integrated solution made good sense for the
business and would be welcomed by many of our
customers. So, in parallel to the in-depth review of
the Group’s strategy that was initiated shortly
after I started, and alongside the continued focus on
operational performance improvements I placed
greater emphasis on taking action to kick-start
and accelerate addressing some of these issues.
Overall, my first impression of G&H was one of
a company with outstanding products, technical
capability and talented people that required
greater focus on operational execution,
customer experience, employee engagement
and better prioritisation of valuable R&D
technology investment.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
STRATEGIC REPORT Q&A WITH CHARLIE PEPPIATT
29
I am incredibly proud of the achievements of
the many talented people across G&H working
together to deliver our new plan for the business.
It is a real privilege to work with such a capable,
committed and hard-working team.”
30
Q
When will we see the benefits of the Strategy refresh
you announced at the interim results?
During the last year we carried out a deep strategic review of the
business and in June 2023 launched a new strategy for the next
decade to make ‘a better world with photonics’ whilst outlining a path
back to delivering sustainable margin growth for all our stakeholders
as an ‘innovative customer focused technology company’.
This is built on our core values, the way we endeavour to do business
at G&H, consisting of Customer Focus, Integrity, Action, Unity and
Precision. The strategy will be delivered through a focus on four key
strategic priorities: Firstly, our people – by creating a purpose-led
culture that ensures G&H is a safe, engaging, diverse and inclusive
place to work and thrive. Secondly, by delivering an exceptional
customer experience and making it ‘easier to do business with G&H’
ensuring long-term customer partnerships and profitable growth.
We will achieve this through disciplined focus on superior
operational execution along with the agility and wisdom to avoid
repeating the manufacturing and supply chain problems of the
recent past. Thirdly, by delivering a better return from our advanced
technical expertise in photonics. We will create enhanced value from
carefully selected R&D projects for the right applications including
developing platform solutions to accelerate our time to market for
new technology and existing technology into new applications. This
will unlock greater value through increased G&H photonics system
content in new products. Fourthly, by the disciplined allocation of
resources to deliver value and accelerate accretive growth, both
organically and inorganically. We will refocus the business to invest in
higher margin products and sectors at the same time as addressing
non-performers, in combination with pursuing ‘speed to value’
acquisitions strategically not opportunistically.
We believe that the successful execution of the four strategic
priorities (People, Self-Help, Technology and Investment) can
deliver return-on-sales accretion potential of 700 to 800 bps
over the medium term, net of the investments required excluding
portfolio changes. This includes benefits from the following
activities: the better utilisation of our well-invested factories from
increased volumes, proactive expansion of outsourcing activities
at an earlier stage in the product life cycle to our proven contract
manufacturing partner in Thailand, productivity gains from
cost-of-poor-quality reduction and other efficiency improvements.
For example, we have already seen labour efficiency gains over the
last year from the re-layout of several machine work centres using
Lean practises at our Ilminster site, as well as the introduction of
higher margin new products and the increased mix of sub-system
solutions with greater G&H technology content. Finally, we will
benefit from the enhancement of G&H’s portfolio through non-core
product rationalisation and bolt-on accretive M&A. We are at the
start of our journey to deliver sustainable margin growth and clear
actions have been taken with progress underway in all of these areas.
Q
What are you most proud of
in your first year at G&H?
Reflecting on my first year at G&H, there are several
accomplishments that fill me with pride. However, if I were to
highlight one aspect that stands out, I am incredibly proud of the
achievements of the many talented people across G&H working
together to deliver our new plan for the business. It is a real
privilege to work with such a capable, committed and hard-working
team. We delivered a strong trading performance in FY2023 with
positive revenue growth enabled by greater operational
execution and teamwork that led to profit growth in line with
expectations and showed a meaningful start to deliver phase one
of our new strategy to deliver sustainable margin growth.
I am also proud to say that G&H is committed to doing business
responsibly; our team has really engaged with improving
employee safety and reducing our environmental footprint.
We achieved a further reduction in scope 1 & 2 GHG Emissions by
20.5% in FY2023 and it was pleasing to see our MSCI (Morgan
Stanley Capital International) Rating improve from BBB to A in
the period. We also submitted our first year of Group disclosure
to CDP (Carbon Disclosure Project) and will receive our score in
January 2024. This was endorsed by two additional sites,
Ilminster and Torquay, attaining ISO 14001 certification to join
our Fremont site. At the same time energy assessments were
conducted at all sites to Environmental Best Practice ISO 50001.
It also makes me proud to witness each day the resilience and
adaptability demonstrated by our teams in the face of global
challenges and organisational changes. The ability to navigate
uncertainties and emerge stronger speaks volumes about the
calibre of our workforce. There is a lot to be excited about as
we look forward.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
STRATEGIC REPORT Q&A WITH CHARLIE PEPPIATT
31
Delivering an exceptional customer experience and
making it ‘easier to do business with G&H’ to ensure
long-term customer partnerships and profitable growth.”
Q
How are you engaging the G&H team
in the delivery of the strategy?
Since launching our new strategy at the half year, I believe we have
made significant steps forward in building the foundations for the
cultural changes required to deliver and sustain our new strategy
through better harnessing and leading the talent across our whole
organisation, establishing dynamic high-performance teams and
creating a purpose-led culture that ensures G&H is a safe,
engaging, diverse and inclusive place to work and thrive.
As part of the rollout of our new strategy in the summer, I ran a
global all-employees communication and engagement roadshow,
supported by other members of the executive leadership team, that
took place in person across all our sites. This was an invaluable
exercise to speak with and listen to all our employees, share details
of the new strategy and address questions directly from the
employees. Subsequently, we have deployed goals across the
business that are linked to delivering our new strategy and there are
regular updates at employee all-hands and townhall meetings to
help align effort and link improvement activity to our new strategy.
During the second half of FY2023 we marked the 75th anniversary
of the founding of the company by Archie Gooch and Leslie Housego
in 1948, with celebratory lunches for all employees at all sites
across the business. This also provided an opportunity not only for
everyone to be deservedly proud about the past, but time to pause
and together look forward into the next phase of the company’s
story. This helped focus all our employees on what is required in
the future for G&H to become and remain an ‘innovative customer
focused technology company’ delivered responsibly by making a
‘better world with photonics’ and ensuring that G&H becomes and
remains the ’first choice’ for all our stakeholders whether that’s
our employees, our customers, our shareholders, our eco-system
partners or the communities where we operate.
We will continue to maintain links with other companies within our
sector and seek to learn from them regarding initiatives to reduce
energy consumption. We will continue to use the structure of ISO
50001 to help us identify where the greatest reductions in energy
use can be achieved. Following recent ISO 14001 accreditation at
our Ilminster and Torquay sites, in FY2024 we have started the
process for a further two sites in Ashford, UK and Keene, US to
receive full accreditation.
In support of this wider agenda, the introduction of a Sustainability
Committee in FY2024 is aimed at providing further momentum
and awareness internally, whilst also improving external
communications and recognition via use of formal reporting
methods to enable improved benchmarking amongst our peers.
G&H will continue to focus whenever practically possible, to
minimise the use of natural resources, improve our energy
efficiency, minimise the generation of waste whilst implementing
and promoting recycling, consider the environmental impact
relevant to our business decisions, minimise pollution and
promote greener transport options and encourage our employees
to act in an environmentally responsible manner. During FY2024,
Environmental Champions are being introduced around the Group,
which is aimed at enabling more projects to be assigned and
further underpin ability to influence change within the sites.
Q
What are the technology developments
in G&H that excite you most?
As part of the new strategy we have updated our technology
roadmaps to deploy platform design solutions to accelerate ‘time
to market’ where G&H has technical differentiators. Under the
leadership of our Chief Product and Technology Officer, I am excited
about the refocused technology developments going into the
three end markets we serve.
Q
How do you plan to reduce G&H’s impact on the
environment in the coming years?
G&H is proud that many of our products are supporting the
cleaner, more efficient generation and use of energy across a
range of applications. Following the positive progress in FY2023,
we will continue working to ensure the environmental impact
of our sites and manufacturing processes are further reduced.
Our investments in solar panels and voltage optimisation systems
coupled with sourcing of renewable electricity are lowering our
greenhouse gas emissions. Combined with our new strategy, our
executive management team have developed a plan with the
objective of delivering annual reductions in the energy used
by the Group and therefore its carbon equivalent emissions.
I am pleased to report that we remain on track for net zero
scope 1 & 2 emissions by 2035.
In our Industrial business we are investing to grow our acousto-optic
offering by focusing on advanced deflectors and modulators for
optical wafer inspection, advanced lasers in microelectronics,
photolithography applications and other high-tech wafer fab
infrastructure expansion. In our fibre optics business unit, G&H’s
‘ultra-clean’ couplers for extreme ultraviolet semiconductor foundries
are now operational and we will continue to develop this world
leading capability. We are also focused on exciting new product
growth opportunities for G&H with fibre optics for distributed
acoustic sensing, wind sensing, undersea sensing and quantum
sensing. Our undersea telecom coupler business was strong in
FY2023 and the outlook remains positive.
In A&D we have carried out an exercise to ensure we are more
focused with our R&D activities ensuring better returns in the part
of the business in future. We have started to prioritise high growth
32
As the world moves towards a more sustainable
future, we are well-positioned to contribute to
and benefit from the increasing demand for
eco-friendly and energy-efficient solutions.”
areas where we offer a highly differentiated product capability such
as satellite communications, directed energy systems, imaging for
shipborne, airborne and spaceborne platforms, multi-spectral
periscopes and advanced protective coatings. Many of these
applications are seeing increased demand as a result of the
conflict in Ukraine.
In Life Sciences, our R&D teams are focused on converting
opportunities that merge different segments of the biophotonics
market with our medical sub-system and full device design &
manufacturing capabilities of the G&H | ITL business. Key areas
of focus are ophthalmology, DNA sequencing, fluorescence and
confocal microscopy, flow cytometry and therapeutic lasers for
aesthetic and robotic surgery.
It is also exciting to see how the recent acquisitions of GS Optics
and Artemis Optical, with their capabilities in precision polymer
optics and advanced thin-film coatings respectively combined
with G&H existing technical competence, is enhancing the
customer focused technology offering of the Group.
Q
How do you feel about the growth potential
of the end markets that G&H serves?
Many of the markets we serve are witnessing rapid advancements
and transformations with photonics being seen as an enabler
for new frontiers of technology. As a Group deeply invested in
innovation, G&H is well-positioned to address the evolving needs
of our customers. We are actively pursuing opportunities to drive
innovation and provide solutions that are not only cutting-edge
but also aligned with the sustainability goals of our clients.
The global landscape is undergoing significant changes and we
see this as an opportunity for disruptive growth. Our commitment
to research and development, coupled with our improving ability
to adapt swiftly to market trends, positions us to capitalise on the
increasing demand for advanced technologies and solutions in
the photonics space.
Additionally, our focus on sustainability aligns with the growing
emphasis on environmental responsibility in the various industries
that we serve. As the world moves towards a more sustainable future,
we are well-positioned to contribute to and benefit from the
increasing demand for eco-friendly and energy-efficient solutions.
Despite some near-term cyclical softening in our industrial demand
seen in H2-FY2023, especially from some of our industrial laser and
machine vision markets, G&H continues to see overall solid order
intake across our Industrial market complemented by good uptake
of new G&H products launched in those markets. Demand for our
high-reliability fibre couplers remains robust, with the opportunity
to offer next generation modules enhancing this long-standing
undersea cable business. We are also seeing demand for our
products going into advanced lithography systems supporting
the global semiconductor wafer infrastructure build-out.
In Life Sciences we continue to see growth in demand for our
products used in medical lasers with particularly strong growth for
devices that support aesthetic and ophthalmic procedures. At the
same time, demand for our medical diagnostic products is expected
to increase, firstly as previously delayed product launches have now
received regulatory approval and secondly, from the investments
we are making into our North American offering focused in
Rochester, NY. The pipeline of medical device business remains
strong as demonstrated by a next generation cancer care product
developed by our customer and productionised by our engineering
team that is moving into volume production in FY2024.
Our Aerospace & Defence markets have seen positive growth
simulated by the conflict in Ukraine, higher government spending
due to geopolitical tension and a continued uptick in civil aviation
with air passenger demand levels expected to rise above pre-
pandemic levels for the first time in 2024. The business has been
successful in securing a number of new programme wins, most
notably the upgrade of the optical sensor suite for UK’s Challenger
platform and several other armoured fighting vehicle programmes
that are nearing their production phase or being accelerated into
production to meet revised delivery timelines.
The order book for the Group is returning to more normalised
levels but at £124.1m at the end of September 2023 compared to
£147.8m at the end of FY2022 and £124.4m at end of H1 FY2023
is still at a historical high.
Q
What were the operational performance
highlights in the year?
G&H delivered strong financial progress in FY2023 which was
underpinned by an improvement in the overall operational output
of the Group. Many of the challenges that were a drag on
performance and constrained output in FY2022, including staffing
shortages, product transfer delays and supply chain disruptions
have been addressed or contained. This has resulted in a much
stronger operational performance across the sites in FY2023 with
step change improvements in several key metrics including
on-time delivery, a more than 50% reduction in factory past due
backlog and notable progress in staffing and training to meet
customer demand. We have also seen several sites embrace Lean
continuous improvement activities to deliver productivity and
safety improvements that will be deployed more widely in FY2024
and beyond.
Another significant operational highlight during FY2023 was the
progress that was made with our Asian contract manufacturing
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
STRATEGIC REPORT Q&A WITH CHARLIE PEPPIATT
33
partner in Thailand. As well as increasing the number of products
manufactured through this third-party partner, we also invested in our
capability to scale-up delivery of this element of our strategy through
the appointment in Q4 FY2023 of an experienced new Vice President
of Contract Manufacturing & Supply Chain.
This was all achieved during a year when we have successfully
integrated two new acquisitions into the business with manufacturing
facilities in Rochester, NY and Plymouth, UK. We have also successfully
closed two smaller satellite factories in Shanghai, China and Virginia,
USA as part of our new strategy to streamline our operating footprint
and deliver superior operational execution.
The global operations team delivered a significant improvement
in the operational performance of the Group during FY2023, however,
we are not complacent with this result and understand
we have significant opportunities to further improve our operations as
part of our new strategy to deliver sustainable margin growth.
Q
How is the integration of GS Optics
and Artemis into G&H going?
During FY2023 the Group completed two carefully selected acquisitions
to enable and accelerate the delivery of our new strategy. In June 2023,
GS Optics was acquired to further expand the Group’s capabilities into
polymer precision optics and increase our Life Sciences presence in
North America. This acquisition also created a presence in Rochester,
NY – a world-leading centre for optics and photonics. Then in July
2023, Artemis Optical in Plymouth became the newest member of the
G&H family, strengthening the Group’s expertise in advanced thin
film optical coatings. I am pleased to share that the integration of
both companies into G&H has been progressing well and to plan.
The strategic decision to bring these companies into our fold aligns
with our vision for growth and innovation and I am confident that
this move will yield benefits for our organisation in the future.
The integration process has been meticulous, focusing on a seamless
blending of cultures, technologies and operational processes. Our
integration teams have worked collaboratively to identify synergies
and leverage the unique strengths of each entity. This concerted effort
has not only facilitated a smooth transition but has also fostered a
sense of unity and shared purpose among our employees. Key
milestones have already been achieved in terms of streamlining
operations, optimising resource allocation and capitalising on the
complementary expertise that GS Optics and Artemis bring to G&H.
The integration has enabled us to broaden our product and service
offerings, enhancing our ability to meet the evolving needs of our
customers. I am particularly excited about the potential for innovation
that arises from the collaboration of diverse talents within our
expanded organisation. We are actively pursuing opportunities
to combine the best practices from all entities, driving continuous
improvement and positioning G&H as a leader in the industry.
34
As we move forward, our focus remains
on delivering exceptional value to our
customers, employees and shareholders.”
We have also seen significant progress in the build
out of the G&H | GS Optics facilities in Rochester
to accommodate the expansion of our G&H | ITL
business into North America. This provides a credible
US capability platform to meet US medical device
OEM requirements and mirror the world-class
capabilities in Ashford enhanced by the optical
systems design know-how in the wider Group. In
Plymouth, we are already seeing positive signals
of the enhanced commercial and technical offering
that the newly combined businesses can offer,
particularly into the A&D space. The teams in
Ilminster, St Asaph and Plymouth are working
together on multiple combined tenders for the UK
market. We are also exploring how this approach
can be deployed in the US and other regions with
full engagement from our global sales team.
As we move forward, our focus remains on delivering
exceptional value to our customers, employees and
shareholders. The dedication and hard work
displayed by everyone involved in the integration
process has been commendable and I am optimistic
about the promising future that lies ahead with
both these businesses fully integrated into G&H.
Q
What are your priorities
for FY2024?
While mindful of the current uncertain
macroeconomic and geopolitical landscape, G&H
is positioned for growth with a strong demand
pipeline and a refreshed strategy. Positive progress
continues with operational output increasing from
our factories and our Asian manufacturing partner
now producing at volume with resourcing upgrades
underway to manage the accelerated qualification
and transfer of additional products. Our R&D talent
and investment is better focused on customer-led
growth opportunities and outlook for the year
ahead looks positive supported by the deployment
of our new strategy across the whole organisation.
In FY2024, the Group will continue to seek
opportunities to enhance value by moving up the
value chain, with disciplined focus on specific areas
of advantage like coating and sub-systems solutions,
and in Life Sciences specifically, through to full
systems where we can embed our biophotonics
technology into medical or IVD devices. Our
commitment to being customer-led remains but
this will require continued changes in behaviours
and processes to ensure better results. We will
continue to offer a balanced portfolio around
Industrial, A&D and Life Sciences but with an
increased emphasis on capturing the opportunities
in Life Sciences, especially in North America, and in
Industrial with the multi-year next generation of
global semiconductor infrastructure build-out. Our
priorities for the next financial year remain focused
on: (1) invest in people, core technology and product
platforms in collaboration with our customers,
(2) operational execution from our own facilities
and proactive outsourcing of products earlier in
life cycle where technological sovereignty is not
a differentiator through our Asian manufacturing
partner, (3) we will address non-performers in
combination with driving value creation from
strategic acquisitions and (4) commercial focus on
‘customer experience’, delivering group synergies,
cross selling and value-added solutions.
Q
How do you attract the
best people to G&H?
At G&H there is a strong culture of expertise with
a refreshed value system anchored on Customer
Focus, Integrity, Action, Unity and Precision.
We aim to attract, promote and retain a diverse
group of talented people who share our values. The
wellbeing of our colleagues remains a priority for
the leadership team, and I am particularly mindful of
the ongoing global ‘war for talent’ and the need for
greater vigilance and attention around our human
resources. Employees are looking for holistic growth
which encompasses not just skills, renumeration
and knowledge, but also expanding their horizons,
fostering creativity, and promoting mental and
emotional well-being. With this in mind, we will be
appointing a new Chief People Officer in FY2024
to upskill our approach and leadership in this
critical area. We will continue to invest in the
personal development of employees, look to
add more apprentices and harness talent from
all age groups, backgrounds and ethnicities.
G&H’s new strategy has outlined ‘People’ as one of
our four key strategic priorities to deliver sustainable
margin growth and ‘a better world with photonics’,
achieved through harnessing extraordinary talent
across our whole organisation, establishing dynamic
high-performance teams and creating a purpose-led
culture that ensures G&H is a safe, engaging,
diverse and inclusive place to work and thrive.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
STRATEGIC REPORT Q&A WITH CHARLIE PEPPIATT
35
At G&H there is a strong culture of
expertise with a refreshed value
system anchored on customer focus,
integrity, action, unity and precision.
We aim to attract, promote and retain
a diverse group of talented people
who share our values.”
36
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Acquisitions
Expanding the
G&H portfolio
STRATEGIC REPORT ACQUISITIONS
37
INTRODUCTION
After implementing the Group’s new strategy,
which identified a path to mid-teen returns
over the medium term, incorporating benefits
from ‘portfolio’ optimisation by addressing
non-performers and pursuing acquisitions with
a focus on ‘speed to value,’ G&H announced
the completion of two consecutive strategic
acquisitions in the summer of 2023:
GS Optics and Artemis Optical.
This represents a significant milestone, aligning
with G&H’s strategic vision for growth. We aim
to add value by transitioning from complex
photonics components to subsystems or full
system solutions. Our focus on this transition
led us to target two businesses that enhance
our fuller photonics systems offering in A&D,
advanced Industrial and Life Sciences markets.
We specifically addressed gaps in coating,
complex systems assembly, and new materials,
and bolstered our Life Sciences footprint
in North America.
GS Optics
Artemis
LOCATION
Rochester, New York
LOCATION
Plymouth, Devon
EXPERTISE
Polymer optic design,
manufacture and coating
EXPERTISE
A thin-film coating
specialist
TEAM
60+
FOUNDED
1916
TEAM
40+
FOUNDED
19thC
38
Expertise in Polymer Optics and Life Sciences
G&H | GS Optics holds a strong reputation as a leader in polymer
optic design, manufacture and coating, particularly in the Life
Sciences sector encompassing medical microscopy, diagnostic
imaging and laser surgery. G&H anticipates an expansion of
solutions for customers, emphasising the enrichment of our
offering from the addition of GS’s polymer materials and extensive
optics heritage combined with G&H’s extensive precision optics
and photonics expertise.
Talent at G&H | GS Optics and in Rochester NY
The 60+ team of committed professionals employed by G&H in
Rochester bring a wide range of talent and skills to the Group across
engineering, tooling design, product management, manufacturing
and other functions. We will be adding to the workforce in
Rochester as part of our growth plans.
G&H also sees Rochester, NY as an ideal location for the company
to attract and retain new talent into the Group aligned to our new
strategy and expansion plans. The city boasts a rich pipeline of
highly skilled talent and an experienced workforce.
The area is globally recognised as a hub for optics and related
industries, boasting a critical mass and collaborative opportunities.
With over 150 optics, photonics, and imaging companies, coupled
with numerous educational institutions specialising in optics and
photonics in the Greater Rochester area, it forms a thriving
ecosystem for G&H to tap into.
About GS Optics
GS Optics, originally founded as Germanow-Simon Corporation
in 1916, has grown into a highly recognised specialist in polymer
precision optics for the US market. G&H | GS Optics specialises in the
custom design and manufacture of precision polymer optics for use
in the biomedical, machine vision and analytical instrument markets,
as well as military and civilian night-vision and visible-range
sighting applications. Located in Rochester, NY, G&H | GS Optics
produces injection moulded spherical, aspherical, cylindrical, and
freeform imaging optics and mirrors from a well-equipped 60,000
square foot facility. In addition, it has well established in-house
capabilities to provide custom designed, diamond turned and
injection moulded prototypes, thin film anti-reflective and
reflective coatings and integrated optical solutions.
Rationale for Choosing GS Optics and Rochester
This acquisition, which is closely aligned to G&H’s new strategy,
significantly increases the Group’s commercial footprint in several
high-growth areas within the large US life sciences market including
ophthalmic lenses, surgical imaging and diagnostic instrumentation.
Prior to acquisition, GS Optics established itself as a leader in
polymer optics, with a strong presence in the medical diagnostics
sector. Combining the capabilities of GS Optics with the global reach
of G&H’s commercial and engineering teams will accelerate the
Group’s growth in optical solutions for the Life Sciences market
as well as for some specific A&D and industrial applications.
G&H is investing into the G&H | GS Optics site in order to establish
our ‘centre of excellence’ for Life Sciences in North America.
Recognising GS Optics’ distinguished track record and the
Rochester area’s reputation for excellence in optical design and
manufacturing, we have outlined ambitious plans to establish the
site as a high-performing design, development and manufacturing
centre. Mirroring many of the existing capabilities we have in G&H
| ITL in Ashford, Kent for the UK and European medical device
market, the expanded capabilities at the site will offer G&H |ITL’s
solutions to the US Life Sciences market from Rochester, NY.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ACQUISITIONS
39
We were delighted to welcome GS Optics, a leader
in polymer optics for the medical diagnostics sector
and other markets, to G&H earlier this year. GS Optics
is a high quality business with a strong customer
base and differentiated technology. This strategic
acquisition will accelerate the Group’s growth plans
in the North American Life Sciences market whilst
also adding to our A&D and industrial activities.
The acquisition is in line with our recently announced
new strategy to become an innovative customer
focused technology company.”
Charlie Peppiatt, CEO
40
About Artemis Optical
Artemis Optical, with roots tracing back to a pioneering optician
in Victorian London, has grown into a Plymouth-based enterprise
employing 40 skilled individuals. The company is today a thin-film
coating specialist renowned for its expertise in a variety of cutting-
edge applications providing products that cater to the diverse
needs of customers primarily in Aerospace & Defence as well as
in the Industrial and Life Sciences markets.
G&H | Artemis is recognised as a global leader in designing
advanced optical filters into three niche market areas. Firstly,
vehicle and dismounted soldier survivability through tailored
electro-optical systems and laser protection. Secondly, mission
critical bespoke head-up display combiners and helmet mounted
displays patches. Thirdly, customised system-enabling optical
filters, mirrors and other bespoke precision optics for the
industrial and life science customers.
Rationale for Choosing Plymouth
G&H | Artemis operates from a modern facility near Plymouth in the
UK and employs a talented design and engineering team, product
managers and technical production operatives. The business
operates from a modern state-of-the-art c.30,000 square foot
facility which serves as a Centre of Excellence to coordinate the
development of new coatings across G&H and is a hugely
complementary fit to the Group’s existing extensive coating
capabilities.
This acquisition, which is closely aligned to G&H’s new strategy,
provides the Group the opportunity to offer both substrates and
coating materials of the highest quality that perfectly align with
their application or product requirements. By applying G&H’s
resources, expertise, and worldwide reach G&H | Artemis will be
able to access new customers and territories for its capabilities.
This acquisition not only enhances G&H’s existing product
portfolio but also creates opportunities for vertical integration and
cross-selling of combined capabilities. The move is expected to
foster greater innovation across the organisation and fits perfectly
into several of the Group’s prioritised areas of technological focus
and growth. G&H | Artemis brings specific competitive advantage
in the A&D marketplace as well as significant technology enabling
synergies in our Life Science and Industrial markets.
Expertise in Thin-Film Coating
G&H | Artemis’s thin-film coating expertise is expected to
significantly expand the Group’s ability to offer customers diverse
choices tailored to their unique requirements. The acquisition
facilitates enhanced vertical integration, allowing G&H to provide
comprehensive solutions to customers in defence and other
industries requiring robust laser protection and advanced optical
filtering. Through this acquisition, G&H customers can select
precise substrate and coating materials of the highest quality,
aligning perfectly with their application or product requirements.
Acting as a Centre of Excellence for thin-film coatings within
the Group, G&H | Artemis will accelerate the coordination of
our extensive global fleet coating chambers, related technical
expertise and help to accelerate the development of our customer
focused roadmap, thus enhancing the ‘customer experience’ of
doing business with G&H.
Talent at G&H | Artemis
G&H | Artemis boasts a highly talented team of 5 thin-film design
engineers and 3 manufacturing and process engineers with an
average tenure of over 20 years. In addition, the G&H | Artemis
team brings its own commercial expertise and relationships in
A&D and precision optics which will complement our existing
global sales teams.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ACQUISITIONS
41
The addition of G&H | Artemis’ coatings expertise
to G&H’s capabilities was identified in our new
strategy as one of the opportunities to deliver
sustainable margin growth for the Company.
Artemis’ renowned excellence in thin-film
coatings complements our existing capabilities
to enable us to deliver advanced photonics
technology and unparalleled value for our
customers. The integration of the business has
proceeded in line with our plans, and we are
well-positioned to accelerate our customer
focused innovation plans to deliver the expected
commercial synergies from the deal.”
Charlie Peppiatt, CEO
42
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Our
Strategy
Our strategy is focused on delivering
sustainable margin growth and
transforming G&H into an
‘innovative customer focused
technology company’ delivered
responsibly by making a
‘better world with photonics’.
STRATEGIC REPORT OUR STRATEGY
43
We seek to ensure that G&H becomes and
remains the ‘first choice’ for all our stakeholders
whether that’s our employees, our customers,
our shareholders, our eco-system partners or
the communities where we operate.
We offer differentiated performance through
the four pillars of our strategy.
1
2
3
4
People
Establish dynamic
Self-help
Deliver exceptional
Technology
Create enhanced
Investment
Focus investment
high performance
customer
value through
to accelerate
teams and a
experience and
technology and
accretive growth,
purpose-led culture
superior operational
platform solutions
both organic and
execution
inorganic
44
1 People
Establish High
Performance Teams
This will be achieved by following G&H’s
corporate values that guide the way we
endeavour to do business, consisting of
customer focus, integrity, action, unity and
precision to deliver fundamental and
sustainable improvement for our employees,
for the profitability of the company and for
the sustainability of our planet.
Customer Focus
We ‘go the extra yard’ to prioritise our
customers both internal and external.
Integrity
We ‘do the right thing.’ Hard on the issue,
fair on the person and kind to the planet.
Action
Be a doer. Understanding ‘it is what we do that makes
a difference.’ Take initiative and show determination.
Unity
We are stronger together. Working together as one team
in the spirit of collaboration towards a common purpose.
Precision
Expertise in our work. Commitment to excellence
and continuous improvement in everything we do.
Priorities
Progress
Future Priorities
• Embed our Vision, Mission, Values and
Behaviours through every step of our
employees’ work experience.
• Invest in our HR team and new tools to
enable them to better support our
employees.
• Apply more rigour and structure to
our talent reviews and invest in our
development and succession planning.
• Review our benefits and incentive plans
to ensure they remain market competitive
and appropriately motivate and reward
our employees for the right behaviours.
• A new Chief People Officer has been
appointed and upskilling of the HR
function through personal development
and where appropriate replacement of a
number of our site HR business partners.
• Assessment underway of a new Group-wide
HR Information System that will provide
our HR leaders with a single source of
information on each of our employees.
• Revised incentive scheme developed
for our sales force ensuring they are
appropriately motivated to grow the
business and secure new customer and
programme positions.
• Promote greater diversity amongst our
team especially at management levels.
• Annual site health and safety audits
established.
• Drive further improvements in our safety
performance targeting zero harm in all
of our facilities.
• Zero reportable accidents (RIDDOR) in
FY2023.
• Successful integration of the two new
acquisitions that joined G&H in the second
half of FY2023. The smooth transition into
G&H has fostered a sense of unity and
shared purpose among our employees and
encouraged a greater willingness to harness
and capitalise on the complementary
expertise that GS Optics and Artemis
bring to G&H.
• Roll out of our accident prevention
“Spot It, Stop It” campaign to encourage
the identification of potential workplace
dangers so they can be fixed before an
accident happens.
• Susan Searle has joined the Board as
new non-executive director, improving
our diversity.
• Susan will chair our newly established
Sustainability Committee which will focus
amongst other things on driving the Group’s
equality, diversity and inclusion agenda.
• In FY2024 we intend to complete the
selection and implementation of our
new Group HR Information System.
• We will develop a more focused approach
to career planning and succession
providing our high potential employees
with structured development activities.
• We will continue to focus on ensuring our
HR function is organised with the right
talent to enable the delivery of the key
‘people’ element of our strategy.
• Renewed focus on how we attract, recruit,
promote and retain a diverse group of
talented people who share our values.
• Our incentive plans for management will
be updated to allocate a greater reward for
cash generation thereby supporting the
Group’s goal to further improve the
efficiency with which it deploys its capital.
• Proactive follow-up to the actions and
improvement opportunities raised in the
FY2023 employee engagement survey to
deliver further improvements in employee
engagement, performance and well-being.
• Our newly formed Sustainability
Committee will establish a series of
supporting working groups to help drive
the Group agenda and accelerate our
efforts in this area.
• We will continue our site health and
safety inspections to achieve further
improvement in our safety at work metrics.
We are targeting zero workplace harm in
our facilities.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT OUR STRATEGY
45
2 Self-help
Deliver an exceptional customer experience
and superior operational execution
Priorities
Progress
Future Priorities
• Our commercial teams have been
• We will develop our Customer Relationship
• Leverage our Customer Relationship
Management tools to improve the
effectiveness of our Business Winning
activities.
• Reorganise our commercial teams
to clearly separate our product line
management activities from our other
selling activities.
reorganised to allow a better focus on
our medium and long-term product
management strategies, separately
from short-term orders generation.
• We are working closely with a number
of our major customers on their next
generation product roadmaps.
• Support our product line and business
development teams in selling more
complex solutions that incorporate
more of the Group’s components and
capabilities.
• The Group’s on time delivery performance
improved significantly during the year.
Overdue backlog associated with
Operations fell to £5.7m from more than
£11m at the previous year end.
• Cross-selling capabilities and products
• We have added new resources in our
Supply Chain team including a new VP
of Contract Manufacturing and Supply
Chain to drive process improvement
in our supply chain teams.
Management tool further to allow us to
further integrate it with our core ERP
systems. This will enable us to reduce
our time to prepare customer quotes
and give our sales team a more complete
dashboard of our overall interactions
with our customers.
• We have appointed a new VP Global
Sales & Business Development who has
significant experience in global business
development and go to market strategies
in high tech product markets.
• We will implement a series of structured
customer engagements in which we will
share our product technology roadmaps
and receive their feedback on how those
roadmaps may support their own next
generation product development activities.
from newly integrated acquisitions
through our global sales team.
• Through strategic engagements with our
customers ensure we are developing joint
product and technology roadmaps that
inform our R&D priorities.
• Disciplined focus on superior operational
execution through productivity, quality,
inventory management, delivery and new
product introduction improvements along
with the agility and wisdom to avoid
repeating the manufacturing and supply
chain problems of the recent past.
• Proactive outsourcing of carefully selected
products earlier in life cycle where
technological sovereignty is not a
differentiator.
• Use our Operations planning processes to
improve our on time delivery performance
and reduce our lead times.
• Anticipate our customers’ quality needs
and drive to exceed them.
• Our Asian contract manufacturing partner
• We will identify further products
to outsource to our Asian contract
manufacturing partner. We intend to
transfer products earlier in their product
life cycle to enable us to secure the
margin accretion and the additional
capacity flexibility that can result from
these transfers.
• We will identify further second source
suppliers to mitigate the risk associated
with some of our sole source suppliers,
especially those that are assessed as
being of higher risk.
• We will deliver further improvement of
safety, quality, delivery, inventory and
productivity across our operations
through Lean and other continuous
improvement tools.
can now provide us with additional
capacity for the build of acousto-optic
devices as demand from our customer
base grows, without impacting our on
time delivery performance.
• We completed the qualification of that
supplier for the manufacture of fused fibre
couplers during the year adding a third
source for the supply of those products
to our customers.
• Over the period of our strategic plan we
intend to increase the proportion of the
Group’s revenue that is manufactured by
our contract manufacturing partner to
around 25%.
• We have completed the transfer of our
North American medical diagnostic
manufacturing activity from its former
site in Virginia into our newly acquired
G&H | GS Optics facility in Rochester.
This means we have more capacity and
access to larger pool of optics talent in
the Rochester, New York state location.
• Closed small satellite factory in Shanghai,
China as part of our new strategy to
streamline our operating footprint and
deliver superior operational execution.
46
3 Technology
Create value through
our technology
Priorities
Progress
Future Priorities
• Spend on R&D in FY2023 totalled £9.3m.
• Focused investment in the vital few
“Lucky Seven” development projects.
• Use our newly acquired G&H | Artemis
business to become a global hub and
Centre of Excellence to develop our
advanced coatings offerings and
to capture a greater share of our
customers’ spend.
• Organically grow our high-value add
optics business by leveraging the acquired
polymer technology with in-house and
newly acquired expertise in coatings,
coupled with our capability to system
integrate and offer optomechanical
assemblies.
• Develop and expand our acousto-optic
regional design centre in Fremont, US
to support a strong pipeline for next
generation product developments and
customer-led R&D.
• Develop our US Life Sciences R&D hub
in our Rochester, NY facility. Secure and
launch US Medical Diagnostic R&D
programmes.
• Technology roadmaps that focus our
investment on those areas identified
as offering the greatest returns.
• A smaller number of development projects
but with same level of overall Group
investment thereby allowing an
acceleration of time to market.
• On time and on budget delivery of our
new product development programmes.
• Revenue from new products totalled
£26.1m and there were 57 new products
released to the market.
• We have identified the vital few “Lucky
Seven” research programmes which will
receive priority given their potential to
deliver materials accretion to the Group’s
revenues and profitability.
• An increasing proportion of the Group’s
• Acousto-optic: commercialisation and
revenues derived from products
introduced in the last three years.
• A greater proportion of our engineer’s
time spent on new product development
activities.
• A greater interaction between our
business development and engineering
teams to maximise our influence on our
customers as well as ensuring our
technology roadmaps reflect our
customers’ latest plans.
ramp-up of optimised Germanium-based
modulators for CO2 lasers used in
semiconductor fabrication and
micro-machining
• Electro-optic: development of new
Pockels Cell devices with new coatings
for medical lasers.
• Fibre optic components: design and
qualification of new fused fibre optic
components for next generation higher
fibre-count subsea networks.
• Fibre optic systems: development and
transfer into production of new fibre-optic
modules for semiconductor and
biomedical imaging.
• Precision optic systems: design of novel
imaging sighting systems for the UK’s
main battle tank.
• Precision optics: design and transfer
to production of coating technology
in the Deep Ultraviolet, opening up
new business opportunities in advanced
semiconductor laser tools.
• Life Sciences: more point-of-care, user
interface and apps development, AI,
machine learning and cyber security
of patient data.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT OUR STRATEGY
47
4 Investment
Apply focused investment
in the business
Priorities
Progress
Future Priorities
• Ensure acquired businesses are
• We invested £18.4m in the acquisitions of
• We will complete the integrations of
successfully integrated into the Group
and that the expected commercial and
operational synergies are achieved.
• Reduce as much as possible the Group’s
investment in its working capital, through
efficient operations planning and
inventory procurement policies.
• Ensure our investment in new capital
equipment is prioritised into the areas of
the business that offer the most attractive
potentials for returns and aligned to new
strategic priorities.
• Regularly review the portfolio to ensure we
have in all cases a differentiated offering
capable of delivering attractive returns.
End of life or divest those elements of the
portfolio that are not differentiated or
non-core.
• Invest in our supply chain partners with
our capital equipment and our on site
supply chain staff to help drive superior
returns for the Group and improved
responsiveness for our customers.
GS Optics and Artemis Optical.
• We have developed detailed integration
plans and are progressing well against
them. We have already transferred our
US medical diagnostics business that was
located in Virginia to the G&H | GS Optics
Rochester campus and closed our
Shanghai satellite manufacturing site.
• As our supply chain is able to increasingly
deliver to us on time and in full we have
been able to reduce the levels of our safety
stock holding, particularly in the second
half of the financial year.
• Where our customers request us to carry
safety stocks to protect their programmes
we ensure that they provide us with
advanced funding to cover the working
capital investment.
• We have set ourselves targets for
improvements in the Group’s returns on
capital employed over the course of the
strategic plan.
• We continue to monitor the market for
potential acquisition targets. We are
supported in this activity by a network
of advisors with whom we have shared
our acquisition criteria.
GS Optics and Artemis. In particular we
are focused on securing the commercial
synergies that their introduction into the
G&H Group will bring.
• We are already seeing the benefits of
the substituting previously third party
spend in both G&H and the two acquired
businesses with internal supply. Our
customers are excited by the combined
offerings that G&H is now able to offer.
• We will work with sell-side advisors to
ensure we are kept informed of acquisition
opportunities that may be a match to our
acquisition criteria and deliver speed to
value creation for the Group.
• Our capital equipment spend will be
focused tightly on those areas of the
business that offer the greatest
potential return.
• We are targeting further reduction in our
inventory holdings applying the supply
chain management principles that have
been successfully deployed in the second
half of FY2023.
48
OPERATIONS REVIEW
Industrial
Financial
Revenue
Adjusted Operating Profit
Percentage of Revenue
£77.1m
(FY2022: £64.6m)
£10.5m
(FY2022: £8.4m)
51.9%
(FY2022: 51.7%)
2023 £77.1m
2022 £64.6m
2021 £55.6m
2020 £54.8m
2019 £60.9m
2023
51.9%
2022
51.7%
Operating Profit
£9.3m
(FY2022: £7.3m)
Adjusted Operating Margin
13.6%
(FY2022: 13.0%)
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT OPERATIONS REVIEW
49
Our Products
Enable
Market
Drivers
• Industrial lasers for materials processing applications.
• Cloud computing, artificial intelligence, hyper connectivity
G&H supplies Q-switches and other acousto-optic,
electro-optic and fibre optic products.
and automation all drive demand for semiconductors.
• Political uncertainties driving the re-shoring of the manufacture
• Semiconductors for lithography and test and measurement
of key components such as semiconductors.
applications.
• Metrology for laser-based, high-precision, non-contact
nanoelectronics and new design germanium modulators.
• Next generation products such as EUV lithography lasers for
measurement systems.
• Optical communications specifically for high-reliability
and high-performance applications.
• New flexible materials being used for the next generation
personal data devices require new forms of industrial laser cutting
and marking machines.
• Remote sensing for applications including asset protection,
• Increasing transfer of data internationally for both business and
perimeter security, strain, temperature and pressure sensing.
personal use drives the demand for subsea data cables.
• Scientific research – the largest proportion being nuclear
• Accelerating investment in wind generated clean energy
fusion research and energy – laser technology is being used
to recreate the conditions found in the core of the sun.
particular in the US. Our ‘laser engine’ sensing technology
improves the efficiency of wind turbines.
• Remote border and infrastructure asset protection receiving
increasing investment driving demand for our sensing products.
Semiconductor Manufacturing
Laser Equipment
Precision Optics
Acousto-optics
Superpolished Optics
RF Drivers
50
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Our Strategy
in Action
With investment and focus on our recruitment activities we were
able to solve many of the resourcing problems that had impacted
the Group in the previous year. We looked at our benefits packages
to make sure we were an attractive place to work for our existing
and new employees.
asking for either a slow down or pause in deliveries to them whilst
they normalised their inventory holding. This market is ultimately
driven by end consumer demand primarily for personal electronics
and this market tends to be naturally cyclical. We are monitoring
closely the demand picture in this market to ensure we make
operational capacity adjustments in a timely manner.
The work we have done with our supply chain supporting additional
capacity for our deliveries in to the Industrial markets in FY2023. We
completed the qualification our contract manufacturing partner in
Asia for the production of high-reliability fused couplers in addition
to the acousto-optic products they are already making for us.
The result was a significant step up in output compared with the prior
year and a reduction in our overdue backlog. Our customers are
seeing our on time performance improve and our lead times reduce.
Overall, sales of products into our Industrial markets grew by
19.5% (15.3% excluding foreign exchange) compared to the prior
year. Revenue growth into our semiconductor markets was
particularly strong as we delivered against the very strong order
book we brought into FY2023. Our FY2023 revenue into this
market included our first deliveries for fibre optic splitter units
used in the world’s most advanced deep and extreme ultraviolet
semiconductor lithography machines. This customer programme
is forecast to increase in volume in the coming years.
Revenues into our core industrial laser market also grew strongly.
Demand for our germanium acousto-optic modulator used in the
Q-switching of solid-state lasers was particularly strong. In the
second half of the year we saw some evidence of over stocked
positions amongst some of our distributor customers who were
Our performance in the sensing market in the year was also strong
with revenues growing by around one third. Our laser engines
provided by our Torquay facility are our core offering into this
market and two significant end customer programmes ramped up
in FY2023 after a quieter performance in FY2022. Our customers’
end programmes are for border, perimeter and pipeline monitoring
and protection. We are also seeing growing demand for our sensing
products that are critical to the safe and efficient operation of wind
turbines. We secured an important new contract win with Europe’s
largest wind turbine provider who rely upon us for the laser engine
that controls their wind turbine systems.
Revenues for our high-reliability fused coupler products used in
subsea data cables grew marginally in FY2023 compared with the
prior year. As noted above we completed the qualification of our
Asian contract manufacturing partner for the production of these
products during the year and first deliveries were made from them
direct to some of our customers. This opens up a third source of
supply for these products and in particular offers the possibility
for some margin expansion on this product line. We now have the
capability to offer significantly more capacity for these products
to our fibre laying customers and we are hopeful of securing a
greater proportion of our customers’ needs.
STRATEGIC REPORT OPERATIONS REVIEW
51
Strategic Priorities
for FY2024
• We have recently invested in further product management
resources for our acousto- and electro-optic products which
form the majority of our product offerings into the Industrial
market. This will enable us to further collaborate with our
customers and invest our R&D in the areas that address
their most demanding needs.
• We will bring new products to the market and ensure that
we remain at the cutting edge of technology in this growing
market. During FY2023 G&H introduced 12 new products in
the Industrial market, generating £10.6m of revenue.
• We will work with our low-cost contract manufacturing
partners to outsource more products to them in order to
support our margin expansion and to extend the lives of
these products. This will help us to offer our customers
additional capacity and shorter lead times.
• We will focus on niche markets that play to the strengths of
G&H, principally those that demand high levels of quality and
reliability, typically requiring technically challenging design
and engineering input incorporating a range of our products.
Those markets may require survivability in harsh environments.
• We will leverage our technology roadmaps to transition from
being a components supplier to a manufacturer of
subassemblies, instruments and systems.
52
OPERATIONS REVIEW
Aerospace
& Defence
Financial
Revenue
Adjusted Operating Loss
Percentage of Revenue
£38.6m
£(2.3)m
26.0%
(FY2022: £30.6m)
(FY2022: (£2.7m))
(FY2022: 24.5%)
2023 £38.6m
2022 £30.6m
2021 £41.1m
2020 £41.4m
2019 £44.2m
2023
26.0%
2022
24.5%
Operating Loss
£(2.9)m
(FY2022: (£3.4m))
Adjusted Operating Margin
(6.0%)
(FY2022: (8.7%))
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT OPERATIONS REVIEW
53
Our Products
Enable
Market
Drivers
• Target designation and range finding used on both land-based
• The Ukraine conflict has driven further investment in both
and airborne systems.
• Guidance and navigation components for ring laser gyroscope
and fibre optic gyroscope inertial navigation systems.
• Countermeasures for ground-based systems and
airborne platforms.
• Space photonics – G&H is leveraging its heritage of ultra-high
reliability components for both space and very high altitude
unmanned aerial vehicle applications in order to address the
growing market for laser-based space communications.
• Periscopes and sighting systems for land
based armoured fighting vehicles.
• Opto-mechanical subsystems for unmanned aerial
and ground vehicles.
• Directed energy systems for military platform and
infrastructure defence applications.
• Advanced optical coatings for both laser protection
and platform stealth.
• Polymer optics for low weight, less expensive optics as
required for solider, body worn system such as night vision
goggles and riflescopes.
armoured vehicles and unmanned aerial vehicles (UAV) and
measures to counter them.
• Users require new features within their latest optical systems that
integrate electronics and optics in single more complex packages.
• Optics used in the defence arena increasingly require complex
coatings, for which G&H is a leading supplier.
• Photonic components and systems offer size, weight, power
and reliability benefits for multiple A&D sub sectors.
• IR optical arrays are used for targeting, range finding, navigation
and surveillance capabilities for both UAV and countermeasures.
• These same capabilities are needed in the operation of remotely
controlled and autonomous A&D systems for land, sea and air.
• Space satellite communication systems are migrating from
traditional radio frequency to laser-based systems. G&H’s
laser amplifier technology sits at the heart of these systems.
• Directed energy systems have already been deployed on to
naval platforms as part of their integrated defence systems.
Significant investment is being made by Western governments
in more powerful laser systems for other applications within
and beyond naval warfare.
Laser Communication
Terminal
Driver Vision
System
Gunner
Sighting
System
Precision Optics
& Lens Assemblies
Directed
Energy
Weapon
Laser
Protection
Filters
54
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Whilst it still represents a small percentage of the Group’s FY2023
revenues, our engineering teams continue to be active in the field of
laser-based space communications. Building upon work previously
completed with our satellite partners we are now developing more
powerful laser amplifiers that will enable transfer of greater
volumes of data. We also continue to be active in working on
customer funded programmes that use the same technology fitted
to very high-altitude unmanned air vehicles. The area of laser-based
space communications is a key element of our more focused and
accelerated technology development programme.
Our teams have continued to work on directed energy systems
with a number of prime contractor customers. G&H’s expertise in
coating the large optics that are positioned at the heart of these
systems means that we are well-positioned to secure recurring
production revenues once development activities are complete.
In the commercial aerospace market we are seeing strong recovery
in demand for our components that are used in ring laser
gyroscopes for guidance and navigation purposes. Our Moorpark
business that provides these components has been asked by its
principal customer to increase delivery volumes and the site is
busy recruiting to service that growing demand picture. We believe
some of that growing demand is a result of our securing a greater
share of the end customer’s allocation of their overall needs given
the quality of the G&H product.
Our growth in revenues in this market compared with the prior
year helped to reduce our adjusted operating loss for the segment
from £2.7m in FY2022 to £2.3m in the current year. We recognise
we have much work to do to restore this business to the levels of
profitability that are required. We are investing additional, dedicated
resources to improve our production yields in our A&D businesses.
We are also reviewing whether we have sufficiently differentiated
product offerings in all of the areas currently supplied by our
existing A&D business to justify continuing to supply.
Our Strategy
in Action
FY2023 saw significant improvements in our on time delivery to
this market thanks to resolving some of the staffing issues that
had resulted from our operational footprint restructuring
programme over the previous two years. Our customers saw a
reduction in lead times and an improvement in our on time delivery
performance. We were rewarded by receiving a greater share of
some of our larger customers’ overall needs.
Important milestones were achieved in the development of our
next generation periscopes systems which are to be deployed
on the upgraded Challenger tank platform and on some of our
export programmes.
We were delighted to be able to complete the acquisition of
Artemis in July 2023. The opportunity to combine optical
substrates from our Ilminster facility with the coating capabilities
that the G&H | Artemis business offers is exciting. We showcased
G&H | Artemis on the G&H stand at this year’s DSEI trade show and
there was significant customer interest in the integrated offering
that we are now able to offer. Our newly acquired GS | Optics
business also provides us a new capability with which to access the
market for low weight optics for solider, body worn systems.
The resolution of some of the production constraints seen in the
prior financial year meant that our A&D revenues grew sharply by
26.2% during FY2023, compared with the equivalent period last
year, and by 22.0% on a constant currency basis. We achieved
significant increases in revenues of components and systems used in
imaging systems in the defence arena, including thermal imaging
cameras from our Keene, New Hampshire facility. Demand is
currently strong for these systems driven in part by the increasing
need for new systems that have the capability to counter UAVs.
Our Boston facility also moved in to full scale volume production
for the supply of their fibre optic modules used in a missile defence
platform. Whilst we continue to work on our production yields for
these highly sensitive modules, which remain below expected level,
we were pleased with the increasing levels of output and the fact that
we were able to reduce our past due backlog on these programmes.
Revenues from our deliveries of periscopes and sighting systems
for armoured vehicles increased marginally from the prior year but
in FY2023 we started to record revenues for our development and
prototyping activities on the UK MoD’s Challenger 3 upgrade
programme. This exciting new programme will generate revenues
for us for several years to come as the UK fleet is progressively
updated. The core technology that is being used will also form the
basis of a number of other programmes that we have either been
awarded or are in the process of bidding, most of which can be
directly linked to the current Ukraine conflict.
STRATEGIC REPORT OPERATIONS REVIEW
55
Strategic Priorities
for FY2024
• We are investing to move up the value chain using combinations
of our components and technologies to demonstrate our
capability to build systems and sub-systems. The addition of
G&H | Artemis coating capabilities further support this strategy.
Our customers are changing their business models and are
actively encouraging companies such as G&H to provide them
the supply of fully outsourced sub-assemblies and modules.
• We will exploit our latest technology in digital periscopes to
win new programme positions in a growing market. Our work
on the UK’s Challenger programmes provides the underpinning
technology that we can carry forward into other programmes.
• We will continue to invest in our manufacturing processes
and engineering in order to meet the needs of our customers.
We are exploring new combinations of optical materials and
thin film coatings to address the market’s developing needs.
• We will introduce a greater number of new products, including
products which look to fill a market need, in a managed and
cost-effective way, as well as take on projects with a high
technical content initiated by our customers. During FY2023
G&H introduced 42 new products and generated £10.5m of
revenue from new products that addressed the A&D market
including space satellite laser-based communication systems,
new sighting systems and IR lens assemblies for UAVs.
56
OPERATIONS REVIEW
Life
Sciences
Financial
Revenue
Adjusted Operating Profit
Percentage of Revenue
£32.8m
(FY2022: £29.7m)
£4.1m
(FY2022: £4.0m)
22.1%
(FY2022: 23.8%)
2023 £32.8m
2022 £29.7m
2021 £27.4m
2020 £25.9m
2019 £24.1m
2023
22.1%
2022
23.8%
Operating Profit
£3.2m
(FY2022: £3.7m)
Adjusted Operating Margin
12.5%
(FY2022: 13.3%)
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT OPERATIONS REVIEW
57
Our Products
Enable
Market
Drivers
• Optical coherence tomography (OCT) primarily used in
• Strong growth in laser-enabled aesthetic procedures especially
retinal imaging for the diagnosis of glaucoma and macular
degeneration, but also now used in the detection of
cardiovascular disease and cancer diagnostics.
• Laser surgery used in a wide range of applications including
prostate surgery, scar correction, cataract surgery, freckle,
mole and tattoo removal as well as wrinkle reduction and
teeth whitening.
from Asia and in the West for tattoo removal.
• A growing middle class influenced by social media eager to
access laser-enabled cosmetic and aesthetic procedures.
• A growing aging population generating demand for a shift
towards early diagnosis rather than later, more serious
treatment of undetected conditions.
• Microscopy – Modern, laser-based techniques are
• A trend towards more point-of-care and personalised medicine
revolutionising the field of microscopy.
driving demand for simple, volume diagnostic products.
• Medical diagnostic instruments – G&H has a range of
capabilities including full product development, design,
manufacturing, certification and after sale service for
the commercialisation of high-quality medical diagnostic,
in vitro diagnostic (IVD) devices, precision analytical,
electro-mechanical and laboratory instruments.
• Advanced polymer optics are playing an increasing part
in medical optics due to the cost and weight benefits as
well as the need for disposable systems to avoid infection.
• New applications for optical coherence technologies beyond
the traditional areas of eye examination and treatment.
• Greater use of inexpensive, disposable plastic optics in
life science instruments to avoid infection.
Medical and
aesthetic lasers
Medical device
design
Optical coherence
tomography
Robotic
surgery
Optical
microscopy
In vitro
diagnostics
58
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Strategic Priorities
for FY2024
• We will complete the investments we are making in business
winning and engineering resources located in our North American
Life Sciences hub located in Rochester and secure a greater
share of the large North American medical diagnostic market.
• We will work with our OEM Life Sciences customers on the
development and accreditation of their next generation medical
devices and secure the follow-on production revenues from their
instrument build.
• We will work on our crystal growth processes and look to outsource
a greater proportion of our component build for medical lasers to
deliver margin expansion from this product line.
• We will integrate our new polymer optics capabilities into the
overall product offering for our customers helping to drive the
further growth of our G&H | GS Optics business.
• We will continue to invest in R&D projects in close collaboration
with our customers, to develop the existing portfolio of products
and to ensure that they remain competitive. During FY2023
G&H introduced 3 new products and generated £4.9m of revenue
from products that address its Life Sciences/Biophotonics
market, especially in the medical instrumentation market.
Our Strategy
in Action
We were pleased to be able to complete the acquisition of the
GS Optics business. This addition to the Group significantly
increases our commercial footprint in several high-growth areas
within the large US Life Sciences market including ophthalmic
lenses, surgical imaging and diagnostic instrumentation. It also
adds the new capability of polymer optics to the Group.
Immediately following the acquisition we have invested in the
G&H | GS Optics site in Rochester, NY state to establish our Centre
of Excellence for Life Sciences in North America. We will use the
site to mirror many of the existing capabilities we have in Ashford,
Kent for the UK and European medical device market to offer
G&H | ITL’s solutions to the US Life Sciences market. We are
growing our medical instrument design and development team at
the Rochester location and are now able to offer our OEM medical
device customers significantly more capacity for production build
in the US than was previously the case.
The deployment of our improved operational processes also
supported our performance in the Life Sciences market. Our Life
Sciences revenue grew by 10.4% in the year to 30 September
2023, compared with the prior year. When measured at constant
currency this represents growth of 8.2%. Medical diagnostic
demand remained broadly flat compared with the levels seen
in FY2022 but one of our customers’ important next generation
instruments has recently received final accreditation and will
therefore move into full scale production providing important
underpin to FY2024 revenues.
Our ITL engineering team in Ashford continue to service a healthy
order book of new development work from which we expect future
production volumes will be secured. We have refreshed the
management team at the site with proven leadership skills
recruited from large Life Science companies and they will
support the site in its next stage of growth and development.
Demand for our components used in specialist medical laser
products achieved mid-single digits growth. Demand was strong
in the first half of the financial year as we dealt with the very large
order book, including some late deliveries brought forward from
the previous financial year. In the second half we saw some tailing
off of demand as some customers requested push outs of
scheduled deliveries whilst they corrected their own inventory
holdings. We remain watchful of the demand picture in this end
market which is ultimately driven by end consumer demand for
cosmetic procedures.
STRATEGIC REPORT OPERATIONS REVIEW
59
60
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Financial
Review
Overview of the Year
We entered FY2023 with a record order book including a higher than
normal level of past due backlog. During the year we have made
excellent progress in delivering that order book and bringing our
late backlog levels down thanks to focused activities in the area of
resourcing and supply chain management. The result was growth
in revenue of 17.3% excluding the effect of the two acquisitions
completed over the summer months. When the contribution
from the two acquisitions is added revenues for the year totalled
£148.5m (2022: £124.8m). It was good to see significant revenue
progression being made in each of our three market areas.
The additional volumes helped to contribute to an increase in
adjusted operating profit to £11.3m (2022: £8.9m), despite the
net headwind from inflation in the first half of the financial year.
We have also invested to add further skilled resources in our
engineering, supply chain and operations teams to establish
a strong foundation on which to support the further growth
of the Group. After the impact of adjusting items which included
acquisition and disposal costs and the cost of the Group’s
restructuring and site consolidation activities, the full year
statutory operating profit was £6.9m (2022: a loss of £(1.6)m).
Inflation was a net headwind to Group profitability in the first half of
the financial year but in the second half our pricing actions offset
the cost base inflation we experienced. After the difficulties we
experienced in securing on time, in full deliveries from our supply
chain in FY2022 and the first few months of FY2023 in the second
half of the year the situation improved and at the same time
materials inflation started to abate.
Adjusted EPS increased to 31.3 pence (2022: 27.2 pence) reflecting
the Group’s improved adjusted operating profit in year. Basic
earnings per share was a profit of 16.1 pence (2022: a loss of 8.0
pence), with the improvement attributable to both the improvement
in adjusted operating profit as well as a reduction in adjusting
items compared to the prior year.
STRATEGIC REPORT FINANCIAL REVIEW
61
We’ve made significant progress in
adding capacity. Our capital is being
deployed efficiently and effectively to
support our growth.”
Organic
Revenue Growth
Total
Revenue
Adjusted
Operating Profit
+17.3%
£148.5m
£11.3m
During the year we invested £11.7m cash in the acquisitions of
GS Optics and Artemis and a further £2.0m in working capital
levels to support the Group’s growing order book and to mitigate
the risks from some elements of our supply chain. Our investment
in additional inventory peaked at the end of the first half and in the
second half of the year we inflowed £3.7m from reductions in our
inventory holdings, reflecting our growing confidence in our
supply chain and our ability to hold lower levels of safety stocks
in the business. Cashflow from operating activities totalled £16.2m
(2022: £6.1m). We ended the year with net debt of £31.7m (2022:
£19.1m) including IFRS 16 lease liabilities of £10.8m (2022: £6.3m).
Dividend payments totalled £3.2m (2022 - £3.1m). At 30
September 2023 leverage was 1.1x times (2022: 0.7 times).
In the first half of the financial year, our order book returned to
normalised levels as our customers took advantage of our
shortening lead times and, in some cases, took steps to regularise
their inventory holdings which had become inflated. The result was
that in the first six months of the financial year, our book-to-bill
ratio was 0.8x and the order book reduced to £124.4m at the end of
March 2023. During the second half of the financial year excluding
the two newly acquired businesses the Group’s book-to-bill ratio
stood at 1.04x and the Group finished the year with an order book
of £124.1m. This provides a good level of underpin and visibility
for FY2024 revenues.
62
Revenue
Year ended 30 September
£’000
%
£’000
%
2023
2022
Industrial
A&D
Life Sciences/
Biophotonics
Group Revenue
77,131
51.9% 64,553
51.7%
38,556
26.0% 30,553
24.5%
32,789
22.1% 29,696
23.8%
148,476
100.0% 124,802
100.0%
Group revenue totalled £148.5m (2022: £124.8m) including a
£2.2m contribution from the two acquired businesses. Group
revenue was 13.6% higher than the prior year on an organic,
constant currency basis. Revenue is the second half grew 5%
compared with the first half, again excluding the contribution
from the two acquired businesses and on a constant currency basis.
We saw growth in revenues across all three of our end markets
with the largest percentage increase coming from our A&D
business where we migrated a number of programmes into volume
production and demand for our components and camera systems
for a range of imaging systems was strong. Revenues into our A&D
market grew by 20.4% on an organic, constant currency basis.
In our Industrial markets demand for our components that are
used in semiconductor production were strong while we also
achieved growth into the industrial laser and sensing market.
Revenue grew in our Industrial markets by 13.7% on an organic
constant currency basis. Finally in our Life Sciences markets
volumes for our medical diagnostic business were broadly flat
compared with the prior year but revenues in to the medical laser
market were good resulting in a 6.2% revenue growth for this
section when measured on an organic, constant currency basis.
Operating profit and margin
The Group’s adjusted operating profit was £11.3m (2022: £8.9m)
and statutory profit was £6.9m (2022: loss of £1.6m) after a
charge of £4.5m (2022: £10.4m) for items excluded from adjusted
operating profit. This included:
• Acquisition costs of £2.8m (2022: £1.9m) of which £1.7m
(2022: £1.9m) related to the non-cash amortisation charges on
intangible assets arising on the Group’s historical and current
year business combinations. The remaining £1.1m related to
costs incurred associated with the changes to the Group’s
portfolio of businesses, most significantly the acquisitions
of GS Optics and Artemis.
• Restructuring costs of £0.8m (2022: £1.2m) associated with
the restructuring of the Group’s operations and the costs incurred
to establish our contract manufacturing partners capability to
manufacture both acousto-optic and fibre optic products.
• Site closure costs of £0.9m (2022: £nil). During the year the
Group closed its small facility in Shanghai and transferred its
G&H | ITL business’ US operation from its site in Virginia into
the campus in Rochester.
The adjusted operating margin of 7.6% (2022: 7.1%) reflects the
benefit of the additional volumes as well as the first stages of our
operational improvement programme. The above margin
improvement was achieved despite a net headwind to profitability in
the first half of the year from increases in input costs outstripping
our own price increases to customers. In the second half of the
year there was a balance achieved between increases in our input
costs and our pricing to customers. Whilst profitability in our Life
Sciences and Industrial businesses is approaching our medium term
target of mid-teens returns our A&D business remains loss making.
We are investing further resources to address poor production
yields on some of our product ranges. We are also assessing whether
some of our current product offering should be discontinued if we
cannot formulate a clear path to acceptable returns.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT FINANCIAL REVIEW
63
A reconciliation between adjusted profit and statutory profit is shown below.
Year ended 30 September
Reported
Acquisition costs
Operating
(loss)/profit
Net
finance costs
Profit/(loss)
before tax
Taxation
Earnings /
(losses) per share
Operating
cash flow
2023
£’000
2022
£’000
2023
£’000
2022
£’000
2023
£’000
2022
£’000
2023
£’000
2022
£’000
2023
pence
2022
pence
2023
£’000
2022
£’000
6,850
(1,557) (1,830)
(717) 5,020
(2,274)
(972)
264
16.1p
(8.0p) 16,164 6,084
1,156
–
57
Amortisation of acquired intangible assets
1,672
1,903
Impairment of goodwill and intangible assets
–
6,726
Restructuring and site closure
1,666
CEO succession
Deferred tax on goodwill
Tax charge arising from restatement of
UK Deferred tax at 25%
–
–
–
1,179
613
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,213
–
(83)
–
4.3p
–
1,116
1,672
1,903
(327)
(412)
5.4p
6.0p
– 6,726
–
(288)
–
25.7p
–
–
–
–
1,666
1,179
(337)
(235)
5.5p
3.8p
934
526
–
–
–
613
–
–
–
–
–
(87)
(695)
127
–
–
–
2.0p
(2.8p)
0.5p
–
–
–
–
–
–
Adjusted
11,344 8,864 (1,773)
(717) 9,571 8,147
(1,719) (1,326)
31.3p
27.2p 18,214 6,610
Finance costs
Net finance costs totalled £1.8m (2022: £0.7m) with the increase
due to the higher drawn debt levels and higher base rates.
Included within these costs is a charge of £0.3m (2022: £0.2m) in
respect of lease interest. A 1% increase in the cost of the Group’s
bank borrowings would have resulted in an annualised increase in
interest expense of £225,000 (2022: £147,000). Further details of
the Group’s debt facilities are set out on page 64.
Taxation
The Group’s overall tax charge was £1.0m (2022 credit of £0.3m)
including a £0.7m credit (2022: £1.6m) in respect of items
excluded from adjusted profit. The adjusted tax charge was £1.7m
(2022: £1.3m) resulting in an effective tax rate of 18.0% (2022:
16.3%). The rate reflects a combination of the varying tax rates
applicable throughout the countries in which the Group operates,
principally the UK and the USA.
Earnings Per Share
Basic adjusted earnings per share increased to 31.3 pence (2022:
27.2 pence), reflecting the improved adjusted profit in the period.
Basic earnings per share improved to 16.1 pence (2022: 8 pence
loss). This improvement was driven by the improvement in adjusted
operating profit and the reduction in adjusting items set out above.
Cash flow
Cash flow generated from operating activities was £16.2m (2022:
£6.5m). During the first half of the financial year the Group invested
£3.5m in additional working capital, principally in additional
inventory to support growing production volumes but also to
protect our customers’ delivery schedules in the face of continuing
inconsistency in on time delivery from some parts of our supply
chain. In the second half of the year, the Group was able to reduce
its investment by £1.5m thanks to better on time performance
from our suppliers and therefore our growing confidence that
lower levels of safety stocks were required.
Our net capital expenditure totalled £6.9m (2022: £8.6m). The
spend included further investment in our contract manufacturing
partner’s facility to equip them for the build of high-reliability fibre
couplers in addition to the acousto-optic devices already transferred
to them. We also transferred our G&H | ITL business on to the
Group ERP system during the year.
Our cash investment in the acquisition of GS Optics and Artemis
totalled £11.7m, of which £8.6m was in respect of GS Optics and
£3.1m in respect of Artemis. To fund the investment $20m was
converted from our uncommitted accordion facility into our base
revolving credit facility. Since that time repayments of $5.5m have
been made. In addition ordinary shares with a value of £2.1m were
issued to the sellers of the GS Optics business and of £2.4m to the
sellers of Artemis. Deferred and contingent consideration of up to
$2.1m is payable for the acquisition of GS Optics dependent upon
its financial performance in the 12 months ended 31 December
2023. Deferred and contingent consideration of up to £2.2m is
payable for the acquisition of Artemis dependent upon its financial
performance to 31 July 2025.
Dividend payments in the year totalled £3.2m (2022: £3.1m).
64
Funding and Liquidity
The Group’s operations are funded through a
combination of retained profits, equity and
borrowings. Borrowings are raised at Group-level
from the Group’s banking partner and lent to the
subsidiaries. At 30 September 2023, the Group
had drawn $34.6m from its Group debt facility
leaving undrawn committed and uncommitted
facilities of $35.4m. The Group’s borrowings are in
the form of a US$ denominated Revolving Credit
Facility (RCF). The RCF matures in March 2027. A
further summary of the Group’s borrowings and
maturities are set out in note 23 of the Group
Financial Statements.
The Group’s leverage is expressed in terms of its net
debt/adjusted EBITDA ratio. Under the Group’s credit
facility, the figure for net debt used in this ratio
excludes IFRS 16 lease liabilities and other IFRS 16
impacts. The Group’s main financial covenants in its
bank facilities states that net debt must be below
2.5 times adjusted EBITDA, and adjusted EBITDA
is required to cover interest charges, excluding
interest on pension schemes, by at least 4.5 times.
At 30 September 2023 net debt/adjusted EBITDA
was 1.1x (30 September 2022: 0.7x). Interest cover
at 30 September 2023 was 9.0x (30 September
2022: 24.6x).
Financial Risk Management
The Group’s main financial risks relate to funding
and liquidity, interest rate fluctuations and
currency exposures. The Group uses financial
instruments to manage financial risks arising from
underlying business activities.
Foreign Currency
The Group is exposed to both translational and
transactional currency risk. We are able to partially
mitigate the transaction risk through matching
supply currency with sales currencies but in our UK
businesses we remain a net seller of US dollars and
Euros. We address these net sales through forward
hedge contracts seeking to cover at least 75% of
the forecast net exposure over the coming twelve
months. These contracts are used to reduce
volatility which might affect the Group’s cash
balance and income statement.
Further details of the Group’s foreign exchange risk
management are set out in note 29 of the Group
Financial Statements.
The following are the average and closing rates of
the foreign currencies that have the most impact
on the translation of the Group’s Income Statement
and Balance Sheet into GBP.
Income Statement
USD/GBP
Euro/GBP
Balance Sheet
USD/GBP
Euro/GBP
Average rate
2023
2022
1.23
1.15
1.28
1.18
Closing rate
1.22
1.15
1.12
1.14
The Group’s revenue is more sensitive to exchange
rate movements than its profit. A one cent change
in the average Dollar exchange rate would have a
£0.7m effect on revenue but less than £0.1m effect
on profit. The Group’s results are not significantly
affected by movements in the Euro exchange rate.
The Group maintains sufficient available
committed borrowings to meet any forecast
funding requirements.
Dividend Policy
In determining the level of dividend, the Board
considers not only the adjusted earnings cover, but
also looks to the future expected underlying growth
of the business and its capital and other investment
requirements. The Group’s balance sheet position
and its expected future cash generation are also
considered. The Board takes into consideration the
Group’s Principal Risks, which are set out on pages
88 to 91. The Group’s ability to pay a dividend is
impacted by the distributable reserves available in
the parent Company, which operates as a holding
company, primarily deriving its net income from
dividends paid by its subsidiary companies.
At 30 September 2023, Gooch & Housego PLC had
sufficient distributable reserves to pay dividends
for the foreseeable future.
Given the strength of the Group’s order book and the
growth potential of the Group confirmed by our
recent strategic review the Board is proposing a final
dividend of 8.2 pence per share (FY2022: 7.9p),
giving a total of 13.0 pence per share (FY2022: 12.6p)
for the year when combined with the 4.8 pence per
share paid as an interim dividend in July 2023
(FY2022: 4.7p). The Board is committed to growing
the level of dividend cover.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
STRATEGIC REPORT FINANCIAL REVIEW
65
We have invested to add further
skilled resources in our engineering,
supply chain and operations teams
to establish a strong foundation on
which to support the further growth
of the Group.”
66
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
ESG
Report
Social
Engaging with our
people
Environment
Reducing energy
consumption
Governance
Corporate governance
framework
Developing our people
Ensuring the wellbeing
of our people
Sourcing from cleaner,
more sustainable
sources
Business integrity
Managing our
supply chain
Promoting equality
and diversity
Supporting our
communities
Image: Pate Whelen/Unsplash STRATEGIC REPORT ESG REPORT
67
We are focused on reducing our impact on the
environment and supporting actions to limit
climate change. We are making good progress
on our sustainability journey and are working
hard to maintain momentum.
We believe the current increased focus on
energy security will drive further growth in
the products we provide that support the
move from carbon based fuels to clean,
renewable energy generation.
We understand the benefits that a diverse
workforce can bring. We encourage talent
with different backgrounds to join G&H, at
all levels within the organisation. We operate
apprenticeship schemes in our facilities and
are delighted to see the progression of our
former apprentices within our management
teams. We are committed to the wellbeing
and development of our people.
We seek to maintain the highest standards
of corporate governance ensuring that we
operate in an ethical and sustainable way
in all parts of our operations.
We have recently established a
Sustainability Committee of the Board
to focus and accelerate the Group’s
activities in this area. We are also working
to ensure our suppliers apply high levels
of governance. We are looking to optimise
and simplify our supply chain, focusing
our buying power on a smaller number of
carefully selected suppliers that are better
able to reach the high standards that we
expect of them.
We are determined
to maintain our high
standards of business
conduct as we know
our reputation is key
in ensuring our
long-term success.
68
Our business activities and the ways
in which we operate support the
UN’s Sustainable Development Goals
are shown below:
3
Good health
and well being
Our products help to diagnose and
treat illness and disease at their
earliest stages.
We are committed to providing a safe and
healthy working environment for our
employees, including their mental health.
5
Gender
equality
We are committed to equal opportunities
within our business. We offer flexible
working arrangements wherever
possible to help retain more women
in our business.
7
Affordable and
clean energy
Our products support the clean and efficient
generation of energy from renewable sources.
We have invested to generate our own energy
from solar sources and we are progressively
buying more and more of our remaining
energy needs from renewable sources.
9
Our products enable our customers
to operate more effectively and use
resources more efficiently.
Industry,
innovation and
infrastructure
We employ scientists, engineers and
talented production operators constantly
innovating in their fields of expertise.
12
Responsible
production and
consumption
We apply high standards of corporate
governance and expect our suppliers
to do the same.
We are reducing our impact on the
environment.
13
Climate
action
We have set a target to be net zero for
scope 1 & 2 emissions by 2035, and
are making good progress against that.
Our products support the generation of
energy from clean, renewable sources.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023Image: ishan/Unsplash STRATEGIC REPORT ESG REPORT
69
Social
We believe that establishing the right culture and values
within our business is critical in allowing the Group to deliver
upon its strategy. It allows us to attract and retain the skilled
and talented people we need in our organisation. The G&H
Values and Behaviours guide how we work with each other
and with our customers and suppliers. The safety and
wellbeing of our employees is of utmost importance to us.
Jim Haynes is our designated non-executive director for
engagement with the workforce.
Employee engagement
We work hard to ensure our employees feel
connected to and engaged with the over-arching
vision of the Group which is “a better world with
photonics”. During the year our CEO and COO
visited all of our sites to communicate the new
G&H strategy and to show our employees how
they contributed to the achievement of the
Group’s strategic objectives. As part of these
visits working sessions were held with each of the
site’s management teams to detail their site’s
contribution to the different elements of G&H’s
growth targets.
We know it is important to keep our people informed
on business developments and on the factors
affecting the Group. We have regular all-hands site
meetings as well as Gemba walks by site senior
managers which review health and safety matters.
Works councils or employee consultation groups,
comprised of management and elected employee
representatives, now operate at all of the
G&H UK sites where management can listen
to representatives’ views and take them into
account when making decisions.
Jim Haynes is G&H’s non-executive director with
responsibility for the Board’s engagement with the
workforce. During FY2023, Jim met with employee
representatives at each site and the feedback he
received has resulted in a number of improvement
actions now being addressed by the Board.
The G&H Values
Customer Focus
We ‘go the extra yard’ to prioritise our
customers both internal and external.
Integrity
We ‘do the right thing.’ Hard on the issue,
fair on the person and kind to the planet.
Action
Be a doer. Understanding ‘it is what we do that makes
a difference.’ Take initiative and show determination.
Unity
We are stronger together. Working together as one team
in the spirit of collaboration towards a common purpose.
Precision
Expertise in our work. Commitment to excellence
and continuous improvement in everything we do.
70
Reward & Recognition
During the year we supported our employees against the effect of
rapidly rising prices by awarding higher than normal inflationary
adjustments to salary. With the support of the Remuneration
Committee we made salary adjustments that averaged around
5.0%. In addition we focused on giving additional support to our
lower earners disproportionately impacted by the cost of living
crisis. To support them in October 2022 we made an additional
cost of living support payment of £500 to our UK employees and
$650 to our US employees. These fixed amounts were paid to
around 75% of our employees and were structured in a way that
was most significant to our lower paid employees.
Finally, in addition to their salary we ensure that all employees are
able to participate in performance related pay schemes that
reward employees for both the financial performance of their site
and the Group but also their personal contribution to the business
during the year.
Developing our People
The Group recognises that it is essential to develop the skills and
capabilities of its employees, and to attract and retain the best
talent available in the regions in which it operates.
To support new employees joining the Group we operate an
onboarding programme to provide additional support structures
during an employee’s first six months with the business.
The Group operates an online performance management and
appraisal system which provides opportunity for individuals to
discuss training needs and career planning with their manager.
Our managers receive training on the setting of SMART objectives
and how to complete an effective staff appraisal. The Group also
operates a talent management and succession planning process
managed through our online appraisal system and from which the
Executive Management Team formulate action plans, and review
progress. The Board also reviews this process annually ensuring
that effective plans are in place.
Given the geographic spread of the Group we recognise the
challenge of delivering training content to our employees in a
consistent and timely manner. To address this, we use an online
learning platform through which a series of training programmes
covering the areas of cyber security, export legislation awareness
and Global Data Protection Regulations are available.
Safety
The health, safety and wellbeing of our employees across the
Group is of paramount importance, and we work hard to ensure all
our people are safe, whether they are working from home, working in
our premises or working with our customers. We have a zero harm
vision for health and safety.
Safety performance is a Group KPI and we are pleased to report a
further improvement in FY2023. We have a range of well-developed
operating policies and procedures in place. These include
executive leadership quarterly reviews in the US and UK, which
incorporate key performance indicators and mitigating action plans
where necessary. We are focused on ensuring our employees
understand the importance of “near miss” reporting so that
corrective action can be put in place to prevent workplace accidents
occurring. Our “Spot it, Stop it” campaigns at each of our sites
actively encourage our people to identify potential safety issues
as part of their day-to-day roles. This campaign has resulted in a
pleasing increase in the number of ‘near miss’ reports, and health
and safety observations form a key part of our site leaders
regular Gemba walks. We back that up with annual health and
safety audit from Group safety managers not normally located at
the site. The closure of actions resulting from these audits is
tracked at quarterly executive team meetings.
Our health and safety data which we benchmark with other firms
in our industry sectors confirms improving trends and best in
class performance levels. Safety performance is quantified as the
number of occupational accidents resulting in any time off work.
During FY2023 there were seven lost time incidents, none of
which were reportable.
Health and Wellbeing
We understand the value of supporting our employees’ health and
wellbeing, including their mental health. We have trained in-house
mental health first aiders and have continued our active
partnering with the mental health charity MIND.
This is supported by regular refresher training for our managers to
help them identify and manage mental health issues in their teams.
The Group also makes available to our employees external employee
assistance programmes (EAPs) through which employees can
access third party advice on good practice health and wellbeing.
In the UK we operate a health cash plan for our employees which
provides financial reimbursement for costs associated with everyday
healthcare and wellbeing solutions. This supplements the US
health insurance schemes which G&H provides to its employees.
To support our employees’ work life balance and to make it easier
for them to manage both work and home commitments we offer
flexible working arrangements wherever possible. In many of our
business support roles we offer a hybrid work from home/office
policy where employees can choose how they do their jobs in a
way that works best for them. Within that more flexible framework
we do however believe in the importance of employees continuing
to have regular onsite attendance in order to enable effective
team-working and develop working relationships.
We value long term employment with the Group and have operated
a long-service recognition scheme across the Group for several
years. This is in addition to our employee recognition scheme which
rewards employees for significant contribution to the business.
The average length of service across the Group is 8.0 years
(2022: 8.3 years).
The loss of key personnel is identified by the Board as a risk within
its ongoing Business Risk Assessment process. Voluntary labour
turnover was 10.8% across the Group in FY2023. This compares
with UK/US Manufacturing sector average of 12%.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ESG REPORT
71
Promoting Equality and Diversity
The Board is committed to providing equal
employment opportunities for all employees and
applicants for employment.
Supporting our Communities
We look to support and work with the local
communities in which we operate.
The Group supports and develops students and
apprentices, especially in the field of engineering
and technology. Support for young students by
providing work experience and undergraduates
and interns with summer placements has been
restricted this year due to the coronavirus pandemic.
The Group has long-standing relationships with
several universities in the UK, including Herriot
Watt Edinburgh, Strathclyde, Glasgow, Exeter and
University College London with whom we work on
collaborative projects as well as providing letters
of support to academic research projects.
We actively support local charities in the
communities in which we operate.
That includes encouraging and supporting our
people to take part in giving their time or raising
money for charitable and community activities
where they live and work. To support this each of
our site leads has been allocated money to use to
donate to local charities preferably in the form of a
“match” for amounts raised by our employees. As a
result, we know we are supporting those causes
that are important to our people.
Diversity is embraced at G&H. We seek to recruit,
hire, develop and retain the best talent. Our
employees have diverse backgrounds, skills, and
ideas that collectively contribute to our success.
The Group operates to national standards of
diversity in employment, including an Affirmative
Action Program (AAP) in the United States which
is designed to attract, retain and develop a diverse
pool of talent. Through the implementation of
enhanced family-friendly policies, including
flexible working policies we are making our
employment offering to our people. Our early year
career Apprenticeship (UK) and Internship (US)
programmes have been successful in drawing
more talent in to the Group.
The Board and Executive management team
monitor the representation of women and ethnic
minorities at different levels and across different
functions within our “talent pools”. In support of
this objective, recruitment partners are instructed
to include female candidates in all shortlist
submissions. This will improve the representation
of women at all levels, notably in leadership
positions that (excluding the Directors) are
currently 86% male (6 of 7) (FY2022: 83% (5 of
6)). We were pleased to welcome Susan Searle to
the Board during the year meaning that two of the
seven Board members are now female, and the %
of female representation on the Board will increase
to 33% in September 2024 on the retirement of
Brian Phillipson.
Female representation
on the Board will increase
to 33% in September 2024.
72
Environment
G&H products help to bring environmental and social
benefits in many of our markets. Our technologies support
the generation of clean, renewable energy and improve
energy efficiency. We provide products that are helping
with the earlier diagnosis of disease thereby supporting
better outcomes for patients. We are also working hard to
mitigate our own impact on the environment. We are on
track to achieve net zero scope 1 & 2 emissions by 2035.
To demonstrate our commitment scope 1 & 2 emissions
are reported as a Group KPI (see page 22).
During FY23 we achieved a reduction on 33.2% in
our carbon intensity measure as defined on page 79.
Our programmes to transition our US sites to
purchase all of their electricity needs from clean,
renewable sources is accelerating building upon
the achievements of our UK sites which had
achieved that milestone at the end of FY2022. We
have been pleased that the US market in renewable
energy is starting to become more mature
providing companies such as ours the opportunity
to purchase energy only from renewable sources.
Our newly acquired G&H | Artemis business will
transition to green electricity at the end of its
current supply contract in September 2024.
During FY2023 we invested in further solar panels
and batteries at our Ashford facility. A new voltage
optimisation system is being installed at our
Ilminster facility and this is expected to result in a
reduction in electricity usage at the site by around
8%. We now have the capacity to generate around
900 kWp of electricity from solar resources
We use the structure of ISO 50001 – energy
management systems - to help us identify where
the greatest reductions in energy use can be
achieved. This informs our sites’ energy reduction
plans, the progress of which are monitored by
our Executive team and the Board. During the
year our Ilminster and Torquay sites achieved full
accreditation to ISO 14001 – Environmental
Management and we have a plan to progressively
extend those accreditations across the rest of the
Group over the coming two financial years.
Environmental and Sustainability Governance
Oversight and governance of our environmental
strategy and performance will be managed
through our newly formed Sustainability Committee.
This will be chaired by Susan Searle and includes
representatives from the G&H Executive team.
Our SVP Global Quality is responsible for the
coordination of our actions in the area of
environmental management and chairs the
Sustainability sub-committee. Responsibility for
local planning and performance lies with our site
managers who work with our site environmental
champions to formulate and deliver projects.
Risk management
We include climate and environmental risks as
part of our overall risk management processes.
The Group risk register is reviewed by the Audit
Committee and the Board. We have identified
environment, sustainability and climate change as
a principal risk for the Group given the reputational
risk to the Group if we fail to deliver upon our
sustainability agenda as well the physical risk
that climate change poses to our operations.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ESG REPORT
73
Our Ilminster and Torquay
sites achieved full accreditation
to ISO 14001 – Environmental
Management and we have a
plan to progressively extend
those accreditations across
the rest of the Group over the
coming two financial years.”
Total scope
1 & 2 emissions
Carbon
intensity ratio
Scope 1 & 2
net zero target
20.5% 33.2% 2035
74
Climate Related Disclosures
We have set out below the Group’s climate-related disclosures in accordance with
the Non-Financial and Sustainability Information Statement. The table shows the
current status of our progress in this area and our plans for the coming financial year.
CLIMATE-RELATED FINANCIAL DISCLOSURE
A Describe the company’s governance arrangements in relation
to assessing and managing climate risks and opportunities
G&H TODAY
The Board has ultimate accountability for climate-related issues.
It formally reviews climate and environmental risks and
opportunities as part of its Group Risk Review meetings.
environment / planet as well as ensuring the Group’s strategy and
operations are aligned with its social and ethical responsibilities
to our employees and the communities we operate in and serve.
During the current financial year we have established a
Sustainability subcommittee of the Board chaired by Susan
Searle to provide further focus and attention on the Group’s
activities in these areas. The Committee oversees actions to
minimise the impact of the Group’s operations on the
An update on key environmental and sustainability metrics
is provided at each Board meeting and in depth reviews are
undertaken on at least an annual basis. The Board monitors
the Group’s performance on climate-related matters using
tow indicators.
PLANS FOR FY2024
We intend to provide the Board with a detailed analysis assessing various of climate related scenarios.
CLIMATE-RELATED FINANCIAL DISCLOSURE
B Describe how the company identifies, assesses
and manages climate risks and opportunities
G&H TODAY
As part of the Group risk management process management
team members and functional leads input in to the process for
identifying risks and opportunities in our organisation including
climate-related risks and opportunities. This process also
identifies risk mitigation actions. Our management team then
monitor progress against these actions through monthly reports
and dashboards. This includes both monthly site reviews as well
as a quarterly deeper dive review of our climate related actions.
PLANS FOR FY2024
During the year our Ilminster and Torquay sites both achieved ISO
14001 Environmental Management accreditation. The accreditation
process was valuable in further educating our managers in
environmental risk management including the climate related
aspects. These two accreditation programmes were led by our SVP
Quality who will chair the subcommittee established to support our
new Board Sustainability Committee. Through these accreditation
processes we are developing a cohort of managers skilled in the
assessment of climate related risks and opportunities.
Our risk assessments in the coming year wil use different scenarios to help prioritise our risk mitigation actions. In FY2024 we will
extend our ISO 14001 accreditation to further sites within the group, expanding the cadre of managers within G&H that are trained
in environmental risk management.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ESG REPORT
75
CLIMATE-RELATED FINANCIAL DISCLOSURE
C Describe how processes for identifying, assessing and
managing climate-related risks are integrated into
the company’s overall risk management process
G&H TODAY
Climate-related risk and opportunities are integrated into the
company’s overall risk management process as set out above.
The sub committee is resourced by representatives from across
the Group.
We do however recognise that many climate related risks are
likely to materialise over a longer time than most traditional
business risks and there is typically more uncertainty around
the severity and therefore financial impact of those risks and
opportunities. To reflect this we will use a longer assessment
window than is typical for our other business risks. This will be
reflected in the more detailed scenario based risk assessment
we intend to undertake in FY2024.
Our ESG subcommittee, chaired by our non-executive director
Susan Searle provides additional focus on the specific climate
related risks and opportunities of the Group.
PLANS FOR FY2024
We will undertake more detailed scenario based risk assessments.
CLIMATE-RELATED FINANCIAL DISCLOSURE
Our executive team play key roles in this risk management process.
• Chief Executive Officer - responsible for the overall integration
of climate related considerations to our Group strategy. The CEO
is a member of the Sustainability Committee.
• Chief Financial Officer - responsible for climate reporting and
compliance with disclosure requirements.
• Chief Operations Officer - responsible for overseeing the
implementation of environmental and energy efficiency
projects at our sites.
D Describe the principal climate-related risks and opportunities arising
in connection with the company’s operations and the time periods
by reference to which those risks and opportunities were assessed
G&H TODAY
We have identified sustainability, climate change and the
environment as a principal risk. There is a risk that we do not
deliver on our commitments to enable a sustainable future,
leading to reputational damage. We have a clear commitment
to achieve net zero for scope 1 & 2 emissions by 2035.
devices are used at the heart of the most precise industrial lasers
enabling the efficient use of materials and resources. Our medical
diagnostic instruments are used for early stage identification of
illness and disease allowing earlier stage treatment that ultimately
leads to a better outcome for patients and a healthier society.
Furthermore, there is a risk that our operations may be impacted
by the effects of climate change.
G&H products can help to address the drive to greater sustainability
in the markets we serve. Specifically our products improve the
efficiency and effectivity of many systems. For example our fibre
optic sensing products are used to maximise the efficient operation
of energy generating wind turbines whilst our latest acousto-optic
PLANS FOR FY2024
Given our position in the supply chain and dependency upon
our customers end platform development, our principal planning
horizon is over the coming five years. In some cases such as our
medical diagnostic equipment activities our work with customers
to develop their next generation instruments can cover a longer
time period.
We intend to undertake a more detailed, scenario based risk and opportunities assessment. This will consider geographical and sector
factors as relevant.
This analysis will develop our initial qualitative assessment in to a more detailed listing of climate-related risks and opportunities
arising from future climate scenarios and time horizons. We will then assign values to these risks and opportunities to identify those
most material to the Group to enable us to prioritise our actions in this area.
76
CLIMATE-RELATED FINANCIAL DISCLOSURE
E Describe the actual and potential impacts of the principal
climate-related risks and opportunities on the company’s
business model and strategy
G&H TODAY
We have set out below the results of our initial qualitative
assessment of the risks and opportunities to the Group from
climate change.
Physical Risks
• Climate change - rain/snow fall variability, rising temperatures
leading to damage to our property and the loss of productivity.
We have identified the following principal transition risks and
physical risks:
Transition Risks
• Policies and Regulation - carbon taxes, stricter climate
legislation
• Markets and Technologies - increases in energy costs, increases
in raw material costs, changes in end market demand, costs to
transition to lower emission technologies.
• Reputation - increased stakeholder concern and expectations,
Opportunities
We have then identified opportunities that will present
themselves to the Group from climate change.
• Markets and Technologies - G&H products can contribute
to a cleaner more sustainable future. On-shoring driven by
our customers’ programmes to reduce their overall carbon
emissions including from their supply chain and scarcity
of materials will lead to more recycling of existing product
favouring long-standing suppliers such as G&H.
inability to attract workforce.
PLANS FOR FY2024
In FY2024 we plan to develop our initial risk and opportunity assessments in to more detailed and quantified assessments that will be
used in our decision making processes relating to business strategy, financial planning and capital allocation.
CLIMATE-RELATED FINANCIAL DISCLOSURE
F Analyse the resilience of the company’s business model and strategy,
taking in to consideration different climate-related scenarios
G&H TODAY
We have not yet conducted detailed scenario based assessments.
However the Group has made good progress in migrating away
from carbon generated energy supplies. We have invested in our
own solar power generation at all three of our owned facilities
in the UK. Our three existing UK sites buy all of their electricity
from renewable sources and we will migrate the newly acquired
G&H | Artemis business on to renewable energy when its current
contract expires at the end of FY2024. In FY2023 we made good
progress in transitioning our US facilities to renewable electricity.
We are on track to achieve our target of being at net zero on
scope 1 & 2 emissions by 2035.
Each of our sites have an energy usage reduction programme
supported by target capital investment.
We see opportunities for the Group’s products from the transition
to a carbon free economy.
The Group’s operations could be exposed to physical risks from
climate change. Some of our sites are located close to existing
water courses and others are located in regions prone to high
snowfalls. It is possible that climate change may increase the
PLANS FOR FY2024
physical risks to these facilities as well as making it more difficult
for our employees to access our sites and to operate those
facilities at full capacity.
Some of our supply chain is located in Asian territories that
experience high rainfall. Climate change may make these weather
events more extreme impacting the ability of our suppliers to
operate and supply us with their products.
We put in place site business continuity plans to identify
mitigation actions to counter risks, including climate related risks.
This includes measures to manage water courses in the vicinity of
one of our factories to ensure extreme water fall events do not
impact our operations.
We work with our larger suppliers to ensure they have put in place
similar business continuity plans to ensure they can be resilient
in the face of climate related change. Our Asian contract
manufacturing partner is considered by the major ratings
agencies to be an example of best practice in the area of business
continuity planning.
We intend to use the more detailed scenario based risk and opportunities assessment described above to develop further risk
mitigation actions to increase the Group’s resilience to climate change.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ESG REPORT
77
CLIMATE-RELATED FINANCIAL DISCLOSURE
G Describe the targets used by the company to manage climate
related risks and to realise climate related opportunities and of
performance against those targets
G&H TODAY
Our key target used to manage our environmental impact is to
achieve net zero scope 1 & 2 emissions by 2035. We are on track
to achieve this. As part of that we have an additional target to
move all sites to.
We measure and report upon our performance in respect of new
product introductions. Our technology roadmaps seek to exploit
the possibilities from the economy’s shift to a low carbon world.
For example our sensing products support the generation of
energy from the power of the wind.
PLANS FOR FY2024
The Executive Directors’ short-term and long-term incentive
programmes include measures related to progress on the
Group’s ESG agenda, including climate-related measures.
Based upon the above assessment we will introduce additional targets and measure performance against them.
CLIMATE-RELATED FINANCIAL DISCLOSURE
H Describe the key performance indicators used to assess
progress against targets used to manage climate-related
risks and climate-related opportunities and of the calculation
on which those key performance indicators are based
G&H TODAY
Our scope 1 & 2 emissions data can be found on page 79. This
includes details as to how our reported figures are calculated.
In FY2023 our total scope 1 & 2 emissions were 3,136 tCO2e,
20.5% less than FY2022. Our intensity ratio was 21.1 tCO2e/£m
revenue, a 33.2% reduction from FY2022. In FY2024 we intend
to assess the various categories of scope 3 emissions and
determine which can be reliably and effectively measured.
We report operational GHG emissions (scope 1 & 2) per £1m
revenue as one of our KPIs (see page 22). We have reported this
metric since FY2020 and have made significant improvement
each year since. In FY2023 our total scope 1 & 2 emissions per
£1m of revenue reduced by 33.2%.
PLANS FOR FY2024
We use the following metrics to track performance.
• CO2e emissions - scope 1 & 2
• Energy consumption - electricity, gas and other carbon emissions
We recognise the need to continue to expand the range of
climate-related metrics we report. In the coming year we intend
to review scope 3 emissions and determine which can be reliably
and effectively reported. We intend to use third party agencies to
assist us in this activity as it relates to our supply chain.
Assess scope 3 emissions categories and determine which can be reliably and effectively measured.
78
External
Recognition
Scope 1 & 2
Emissions
We receive external recognition for ESG matters.
We received a rating of A in MSCI’s latest ratings report.
From FY2024 we will also be working with EcoVadis and
CDP on their climate change surveys.
We are targeting to be net zero for scope 1 & 2 emissions
by 2035. We are proud that in FY2023 we made a further
significant reduction in our emissions. During FY2024
we will also be assessing which of the scope 3 emission
metrics it may be practical for us to report against and
what reduction targets may be possible.
In FY2023 we moved our Cleveland, Ohio facility to
renewable electricity. Given the high temperature
requirement for crystal growth conducted in that facility
this assisted materially in the reduction of our scope 2
emissions in the year.
Each of our sites has developed a plan to reduce its
electricity consumption. Progress against these plans
is reviewed on a quarterly basis by the Executive team.
Set out below are a selection of actions coming from
this plan:
• LED lighting where not already installed.
• Alternative forms of heating.
• The introduction of heat recovery from
manufacturing equipment.
• Installing battery systems to harness excess energy
generated from our Solar PV systems.
• Upgrade to equipment with improved energy efficiency.
We also reduce our impact on the environment through
our recycling programmes. At our UK sites we are now
measuring our water usage and waste to landfill so that we
can put in place and measure reduction plans. We plan to
start measuring water usage at our US sites in FY2024.
It is not currently possible to secure waste to landfill
measures for our US sites as our service providers do
not currently capture that data.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ESG REPORT
79
Energy Use and
Scope 1 & 2 Emissions
The primary drivers of our scope 1 & 2 emissions reduction
in the year were:
• The transfer of our Cleveland, Ohio site to renewable,
purchased electricity.
• A reduction in energy consumption as a result of site
improvement activities.
• Further investment in solar panels.
Our emissions data is calculated centrally from data collected
locally. In reporting our carbon dioxide emissions, we have
followed the UK Government’s Environmental Reporting
Guidelines. We have also followed the Greenhouse Gas (GHG)
Reporting Protocol and the Streamlined Energy and Carbon
Reporting (SECR) guidelines. 2022 Conversion factors have
been used for October 2022 to May 2023 inclusively, and 2023
Conversion factors used for June 2023 to September 2023
inclusively. In the US eGrid 2019 Conversion factors have been
used for October 2022 to January 2023 inclusively, and eGrid
2020 Conversion factors used for February 2023 to September
2023 inclusively.
We have selected as our primary intensity measure carbon
dioxide emissions per £1m of revenue for our global scope 1 &
scope 2 GHG emissions (expressed in tonnes of carbon dioxide
equivalent). We are using an operational control boundary for
direct GHG emissions. For scope 1 emissions we include our
total owned and leased vehicles’ direct emissions impact. By
far the largest element of our energy usage is our US scope
2 purchased electricity. Our reported data is collected from
metered sources.
CURRENT REPORTING YEAR
FY2023
COMPARISON REPORTING YEAR
FY2022
The Group achieved a 33.2% reduction in its intensity measure of tCO2 emissions per £1m of revenue.
United
Kingdom
Rest of
World
Total
United
Kingdom
Rest of
World
Emissions from activities which the Group own or control including
combustion of fuel and operation of facilities (scope 1)/tCO2e
At the end of the financial year 69% of the Group purchased electricity came from renewable sources
164
275
439
161
269
Total
430
Emissions from electricity, heat, steam and cooling purchase for
own use (scope 2)/tCO2e
75
2,622
2,697
–
3,511
3,511
Total gross scope 1 & scope 2 emissions/tCO2e
239
2,897
3,136
161
3,780
3,941
Energy consumption used to calculate above emissions:/MWh
5,784
12,881
18,655
5,126
11,940
17,066
Tonnes of carbon dioxide equivalent per £1 million of revenue
3.8
33.5
21.1
2.8
55.7
31.6
Scope 1
direct GHG
emissions
Scope 2
energy indirect
emissions
SCOPE
REPORTED
Includes emissions from activities owned or
controlled by G&H that release emissions into
the atmosphere.
Examples include emissions from combustion
in owned or controlled boilers, vehicles.
Report includes:
• Emissions from combustion
of gas and fuel for transport
purposes.
Includes emissions from G&H’s own consumption
of purchased electricity, steam, heat and cooling.
Report includes:
• Emissions from purchased
These are a consequence of the group’s activities
but are from sources not owned/controlled.
electricity.
The Group achieved a 33.2% reduction in its intensity measure
of tCO2 emissions per £1m of revenue.
At the end of the financial year 69% of the Group purchased
electricity came from renewable sources.
80
Governance
Corporate Governance
The Board is committing to maintaining the highest
standards of Corporate Governance. We conduct
our business activities honestly and with integrity.
For more information on the Group Corporate
Governance Framework see page 98.
Supporting our G&H Code of Conduct we have an
extensive suite of policies. The policies are published
on our website at www.gandh.com/environmental-
social-and-governance. They apply across all of
our operations. We provide training to ensure
employees understand and implement our policies.
We also monitor compliance supplier audits.
Code of Conduct
The G&H Code of Conduct incorporates:
a) critical attention on ethical business practices
b) the provision of a safe and healthy work place
c) business conduct that demonstrates respect for
co-workers, suppliers, customers and partners
d) the Group’s commitment to the principles of
equality and diversity and compliance with all
relevant equality and anti-discrimination
legislation
e) seeking excellence in management practice
through the ongoing development of business
aligned human resource systems and initiatives,
structured training and development programs
for employees through which they can enhance
the skills, knowledge and capability necessary
for further growth within the organisation
Group health & safety statement: Managing health
and safety is a key priority and is an integral part
of managing the total risks faced by our business.
Equal opportunity statement: The Group is
committed to providing equal opportunities for
all employees and applicants for employment.
Anti-corruption and bribery: G&H takes a
zero-tolerance approach to bribery and corruption
and is committed to acting professionally, fairly
and with integrity in all our business dealings and
relationships wherever it operates.
Fraud policy: The Group has in place systems
to prevent and detect fraud.
Modern slavery: G&H is committed to preventing
slavery and human trafficking in its corporate
activities, and to ensuring that its supply chains
are free from slavery and human trafficking.
Environmental: G&H aims to reduce the
environmental impacts of its activities and
to help its customers, suppliers and partners
to do the same.
Supplier code of conduct: Sets out the minimum
level of behaviours and practices we expect to
see applied by our suppliers regardless of where
they operate.
Conflict minerals: We believe in the ethical
sourcing of materials used in the manufacturing
processes within G&H. G&H will not purchase
any materials which originate from any areas
of war or conflict.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT ESG REPORT
81
Ethics
Human Rights
97% of the Group’s employees are based within the major
advanced economies of the UK, USA, France, Germany and Japan,
which have strong legislation governing human rights. The Group
complies fully with applicable legislation in these areas, and the
other countries in which it operates, to ensure the rights of every
person (whether employees, suppliers, clients or stakeholders)
are respected. We have in place employment policies and
practices which support and promote diversity and equal
opportunities to make sure all employees are treated with dignity
and respect, and all staff are provided with a safe, secure and
healthy environment in which to work, regardless of where in the
world they are located.
Supply Chain
It is important to us that our suppliers operate to the same high
standards that we set ourselves. We support them in this be
establishing clear contractual commitments and back that up
through on site audits. Our supplier contracts cover areas such
as modern slavery, safe working practices and anti-bribery /
corruption to ensure the supplier adheres to our policies.
We undertake annual risk assessments of our suppliers and the
outcome of that process determines not only the decision as to
whether to work with a supplier but also those suppliers that are
selected for an onsite audit visit to ensure they are in compliance
with our policies. We have a team of four G&H employees
permanently based in our large contract manufacturing
partner’s facility.
Whistleblowing
We have a whistleblowing policy which encourages open and
honest communication where incidents of non-compliance are
seen in our business. Whistleblowing issues are reported directly
to management, and any significant issues, should they arise, are
reported to the Audit Committee and the Board. In each instance,
cases are investigated in detail and appropriate action taken.
Compliance with Regulations and Standards
We do not tolerate practices which contravene international
standards. Regulatory demands upon us vary around the world;
however, we have established a core compliance team to ensure
the Group fully adheres to legislative and regulatory requirements
whilst adapting to local needs. We support this with online training
tools through which we make sure our employees know what is
expected of them.
82
S172
Statement
Our stakeholders are key to the long-term sustainability
of our business. The importance of open and meaningful
engagement with all our stakeholders is fully embraced by
our Board members and is encouraged through all levels of
the Group. The Board has identified its key stakeholders and
has considered how it engages with these groups so as to
maintain a clear and current understanding of their views.
Some of those engagements are undertaken directly by the Board
and some by the Group’s senior managers and reported back to the
Board. Throughout the year the Board assesses how its decisions
and the Group’s activities impact our various stakeholders.
The Board’s oversight of the Group’s risk management process
through which the senior leadership team provide updates of
the Group’s risk environment together with associated action
plans to mitigate those risks, is another example of how the long
term sustainability of the Group is managed by the Board.
As a Board we have a duty to promote the success of G&H for the
benefit of our members whilst having regard to the interests of
our people, the success of our relationships with suppliers and
customers and the impact of our operations on the environment
and communities in which we operate. Stakeholder considerations
are included in all Board discussions and decisions. Presentation
and other materials provided to the Board help it understand
the benefits and risks associated with its proposed activities.
If a chosen course of action adversely affects one group of
stakeholders for the collective benefit of others we always try
to ensure they are treated fairly.
The Board is focused upon the long-term consequences of its
decisions as well as more immediate operational matters. For
example, our approach to partnering with customers on their next
generation product developments allows us to build long term and
mutually beneficial relationships which will live for many years.
Our technology road maps will deliver benefits potentially many
years in the future meaning that we are investing now for the
future benefit of the Group.
The Board understand the importance of maintaining high standards
of corporate governance and avoiding reputational issues that may
follow if the Group does not. Consequently, we strive to follow best
corporate governance practices and have a governance framework
in place that allows us to make reasoned and informed decisions.
Further information on how the Board and its Committees operate
can be found in the Corporate Governance Report.
The Group has in place specific polices to ensure all Group
employees operate in an honest and ethical way. Details of these
can be found in the ESG Report.
We have set out below our engagement with stakeholders. This
constitutes our Section 172(1) Statement. Further information on
how these duties have been applied can be found throughout the
Annual Report.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT S172 STATEMENT
83
Customers
Our customers rely upon us for innovative, advanced
solutions for their photonic needs. We invested £9.3m in
research and development in FY2023 in products and
solutions that seek to address their current and emerging
needs. We understand that our customers depend upon us
to supply our products on time and to the required quality.
How we engage
G&H has a track record of working with our
customers on their next generation development
needs, often many years prior to entering in
to volume production. The Board is regularly
updated on the work of our engineering teams
on our technology roadmaps to ensure we are
progressing to plan and those plans address the
needs of our identified launch customers.
Outcomes
In February 2023 we used a third party
organisation to undertake a survey of our
customers. The survey covered all sites in the
Group and customers were given the option of
providing their feedback anonymously if they
wished to.
The survey results showed that G&H was
performing well in the area of product quality and
technical support but delivery performance was
scored poorly. Specifically customers wanted to
see shorter lead times and better on time delivery
performance. This aligned with our expectations
as we were aware that during FY2022 our delivery
performance had not been good enough. This was
as a result of the significant operational footprint
projects that had added complexity and disruption
into our factories and the problems we had had
recruiting sufficient team member to service our
growing order book. In FY2023 we set ourselves
the objective of significantly improving our on
time performance and reducing our overdue
backlog. This has been successful and during
FY2023 we steadily increased our on time delivery
performance and by the end of the year had
roughly halved the level of our overdue backlog.
The Board is regularly updated on the timeliness
and quality of product deliveries to our
customers. As our order book has grown and we
have struggled during the financial year to add
productive capacity we are very aware that our
on-time delivery performance to our customers
has in some cases fallen below the high standard
that we aspire to. We have put in place a series of
measures including increasing our holdings of
inventory and making ourselves more attractive
as an employer to assist with our recruitment of
new employees. As a result of these measures
our output is increasing and our on-time
performance to our customers is improving. We
maintain regular contact with our customers to
keep them informed of this progress.
As part of or review and refresh of the Group’s
strategy during FY2023 we took the opportunity
to review again the technology roadmaps with
the objective of reducing the number of projects
we are running thereby allowing a concentration
of effort on those projects that are considered
to have the most attractive returns. We expect
this to help accelerate our time to market for our
next generation products. Our R&D spend in
FY2023 totalled £9.3m and we bought to market
57 new products.
Priorities for FY2024
We will continue to work on further reducing our
overdue backlog. We will also conduct another
customer survey to measure our progress on these
objectives through the eyes of our customers as
well as getting further update feedback form
them on other aspects of our performance.
The Board will review at each of its meetings
progress on the key projects within our technology
roadmaps. In FY2024 two important projects
that will lead to production deliveries are our
engineers’ work on embedded imaging
periscopes which are used in the Challenger tank
upgrade programme and other armoured vehicle
progress in the export market, and first production
deliveries to a major European wind turbine
integrator for our bespoke wind sensing modules.
84
Employees
Our people play a crucial role in helping us pursue our
strategic goals. We work to provide them with safe working
conditions, attractive terms of employment and the ability
to develop their careers in a fair and engaging workplace.
How we engage
We have a number of channels through which we
engage with our employees. There are regular all
hands meetings whereby local site management
engage with an receive feedback from site
employees. These are supplemented by regular,
more detailed feedback sessions with employee
representative groups.
When members of the Group executive visit sites
they will typically either join the site’s all hands
meeting or schedule a separate session through
which they can receive feedback from employees.
Outcomes
We achieved a further reduction in lost time
accidents in the year and are working to eliminate
these completely. We ran “Spot it, Stop it”
campaigns in the business to increase awareness
on the importance of near miss reporting as a
way or preventing accidents from happening.
We have extended our mental health first aider
programmes and held a number of awareness
workshops during the year intended to help
managers recognise early warning signs of
mental health issues amongst their teams.
We were aware of the effect of high level of cost
inflation on our employees especially those who
are lower paid. As a result we made one off awards
of £500 in the UK and $650 in the US to help our
employees through this difficult period. These
fixed amounts were paid to around 75% of our
employees and was structured in a way that was
most significant to our lower paid employees.
Priorities for FY2024
We will ensure there is regular feedback to our
teams on the progress of the Group against its
refreshed strategic plan.
We will also work hard to promote diversity and
inclusion across the Group. We have an objective
to increase female representation amongst our
management teams.
Jim Haynes is our designated non-executive
director for employee engagement. During the
course of FY2023 Jim met either in person or via
a video link with employee representative groups
to hear their feedback on the business. Jim also
arranged similar sessions with employees from
our two newly acquired businesses GS Optics
and Artemis to hear first-hand their experience
of the G&H acquisition and integration processes.
Further details are given on pages 69, 99 and 100.
Following the conclusion of the refresh of the
Group strategy our CEO, Charlie Peppiatt visited
each of the Group’s sites to present the outcome to
the site’s employees. More detailed sessions were
then held with the site’s management team to
discuss how the site was expected to contribute to
the various strategic objectives that underpinned
the achievement of the strategic financial plan.
The feedback received by Jim Haynes from his
structured programme of interactions from site
employee groups was very informative. This
identified that there is scope to better reflect
the views and suggestions of employees in the
production process that has the potential to
improve efficiency. It also highlighted some areas
for improvements around the HR aspects of our
early-stage communication activities with
employees of acquired businesses. A set of actions
has been developed from this feedback and will
be monitored by the Board during FY2024.
Each of our sites has hosted celebratory events
to mark G&H’s 75th anniversary.
More details of our engagement with our
employees and the results of those engagements
are set out in the ESG Report.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT S172 STATEMENT
85
Shareholders
We maintain strong relationships with shareholders.
We want to ensure they understand our strategy, progress
and performance and that we understand how they view
our business. Our shareholders rely upon us to create value
over time. We have consistently increased our dividend
over the years. In FY2023 we paid £3.2m in dividends
to our shareholders.
How we engage
We engage with our shareholders through
investor roadshows led by the Chief Executive
Officer and Chief Financial Officer. This included
updating them in June 2023 on the results of the
review of the Group’s strategy.
The Group’s brokers provide independent
feedback to the Board on shareholder opinions
and their views on our meetings with investors.
Regular trading updates are provided as well as
the Annual Report.
We understand the focus many of our shareholders
place on the area of Executive Director
remuneration. Brian Phillipson, the chairman of
our Remuneration Committee, has consulted
with our principal shareholders on this subject
including the Group’s Long Term Incentive Plan.
The views expressed by investors have been
reflected in the Group’s revised Long Term
Incentive Plan. Investor feedback on the
importance of tying elements of the short
term incentive plans to progress on the
refreshed strategic objectives has also been
reflected in the schemes put in place for
FY2024. Further information is given in the
Directors’ Remuneration Report.
In January 2023 we hosted around 50
shareholders and analysts at our Ilminster facility
as part of events organised by Investec and Peel
Hunt. We took the opportunity to provide them
with an update on the Group focusing in particular
on our fibre optic and optical systems capabilities
and the future opportunities we see for our
products in those technology areas. Materials
from these events in available in the Investors
section of our website.
Outcomes
Our shareholders were briefed on the Group’s
revised strategic objectives which shows a
route to mid-teen returns in the medium term.
The additional detail and the focus set out in
it on targeted investment in a smaller number
of high growth opportunities was particularly
well received by our shareholders.
Priorities for FY2024
We will continue to offer an extensive investor
engagement focused primarily around our
roadshows in June and December 2024. This will
include specific updates on our progress towards
the achievement of our strategic priorities.
86
Suppliers
The supply of goods and services to our operations is critical
to our overall success. Our suppliers expect from us fair
contracting, on time payments and accurate forecasting
of our future requirements. We review the performance of
our suppliers on a monthly basis and work with them to
implement improvement programmes.
How we engage
Our Supply Chain Management team are
responsible for the engagement with our suppliers.
We have put in place supply contracts which
include the minimum standards which we expect
our suppliers to operate to. During FY2023 we
built significantly on the relationship with our main
contract manufacturing partner as we worked
with them to qualify their production facilities for
the manufacture of some of our fibre optic
products in addition to the acousto-optic products
that they are already producing. In the first half of
the financial year we were also experiencing some
difficulties in securing on time in full deliveries
especially for electronic components. As a result
we therefore established a number of new
supplier relationships in this commodity area.
We have a team of four employees permanently
based at our principal contract manufacturing
Outcomes
We established relationships with new suppliers
during the year to help de-risk our production
programmes sensitivity to shortfalls in electronic
component supply.
Priorities for FY2024
During FY2024 we intend to start monitoring
our suppliers’ impact on the environment. We
intend to work with Carbon Disclosure Project
(CDP) to help us with this activity using their
questionnaires and processes to help our
suppliers provide the information we are seeking.
Once we have completed these initial
assessments we will then work with our
suppliers with higher carbon footprints to
see how these may be reduced.
partner’s facility in Asia to ensure we keep them
informed of our latest forecast demand profiles as
well as working with them to explore ways in which
we can jointly improve their operations and reduce
the cost of manufacture. Our two business
systems are connected with suitable security
controls in place, allowing our two organisations
to communicate in a very timely manner.
For our other suppliers we have a team of supplier
quality engineers who undertake on site visits to
our suppliers to audit their compliance with the
standards we expect of them. The selection of
suppliers to audit in any period is based upon a
risk assessment tool which considers both the
materiality of the supplier to G&H’s operations as
well as the control environment in place at the
supplier’s facility.
We refreshed our standard supplier contracts
during the year clarifying some of the performance
standards included within them. This reinforces
our Supplier Code of Conduct that sets out our
expectations for matters such as human rights,
employee health and safety and fraud prevention.
As part of our refreshed strategic plan rolled out
in FY2023 we made it clear that we intend to
increase the proportion of the Group’s revenue
that is derived from products that have been
subcontracted to our contract manufacturing
partners from its current level of less than 10%
to around 25% by the end of the plan period.
We will therefore be identifying the next set of
products that we believe are most suitable to be
outsourced and to start those transfers. We have
already completed the qualification of our Asian
contract manufacturing partner for the
production of high-reliability fused fibre couplers
and in FY2024 we will significantly increase the
proportion of the Group’s revenue for this
product line that is sourced from that partner.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 STRATEGIC REPORT S172 STATEMENT
87
Communities
We want to engage with the communities in which we
operate in a responsible manner. We aim to make a
positive contribution to our communities though the
employment we provide, the suppliers we work with and
the taxes we pay. Our site general managers each have
funding allocated to them to support local charities.
We ask them to focus on those charities that their site
employees care about and so they frequently spend
these funds in the form of a match for amounts raised
by our employees themselves.
How we engage
We invest in job creation. We attend job fairs
close to our sites to encourage school and
college leavers to join G&H. We also have
established relationships with universities
and fund PhD studies in the file of photonics.
Our facilities offer high quality employment across
a range of functional areas. We are pleased to offer
apprenticeships to employees at the beginning
of their career journeys. We have supported the
charity MIND through fund raising activities.
Our growing business meant we were able to
increase the volumes of products and services
we bought form our suppliers many of whom
continue to be local to our facilities.
Outcomes
Thanks to the growth in demand for the Group’s
products we were able to add new roles during
FY2023 at most of our facilities. We held a
number of apprentice days where local school
leavers were able to visit our facilities and see
the work we do.
Priorities for FY2024
We will continue to support our employees
in contributing to local causes close to their
hearts. We will also engage positively with
our local communities about any changes
to our operations.
Where to find out more
Employees – ESG Report
Investors – Corporate Governance Report
Environment – ESG Report
Society – ESG Report
Long-Term Success – Strategic Reports
88
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Principal Risks
and Uncertainties
The Group has a process for the identification and
management of risk as part of the governance
structure implemented by the Board. Management
of risk and maintenance of systems and processes
to manage those risks is the responsibility of the
Board of Directors. In managing and mitigating
risk, a comprehensive and robust system of
controls and risk management processes has been
implemented. The Board’s role in the risk
management process comprises:
• Promoting a culture of integrity throughout the
business;
• Making risk management a core part of the
business;
• Setting the appetite for risk;
• Identifying the key risks and ensuring they are
effectively communicated and managed; and
• Establishing overall policies for risk management
and control.
The Group maintains a comprehensive risk
register which is approved annually by the Board.
The Group’s functional heads and leadership team
all have input into the risk identification process.
The register clearly identifies who in the
organisation has responsibility for the day-to-day
management of the identified risks, and has a
timeline for any required mitigating actions. The
risks are ranked according to their likelihood of
affecting the business and the estimated impact
they may have. Risks are identified across four key
areas: strategic risk, operational risk, commercial
risk and financial risk.
The assessment of key risks during the year has not
identified any new significant risks. A number of
the risks identified in the FY22 Annual Report have
reduced in severity during the year. The Board is
satisfied that the mitigating actions taken in
response to the identified risks are appropriate
and will keep this under review. The Board is
conscious of the importance to our stakeholders
of our ESG agenda and the potential impact of
climate change on the operations of the Company.
In response to this risk The Board has established
a Sustainability Committee to ensure that the
Company’s strategy and operations are conducted
in a sustainable manner and consistent with our
corporate values. We will report in detail on the
activities of this new Committee next year.
The Audit Committee has responsibility for
reviewing the effectiveness of the risk management
framework and internal controls and ensures that
the Group complies with relevant regulations and
laws. Although the Group does not have an internal
audit function, the function of internal control is
discharged by the Group Finance team. Its
responsibility is to monitor compliance and conduct
or, where appropriate, commission specific
reviews. The Audit Committee has reviewed the
work undertaken by Group Finance to review
compliance with the Company’s financial control
framework during the year.
The following represent the significant risks and
uncertainties identified in the Group’s risk register.
STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES
89
Geopolitical risk
RISK
MITIGATION
CHANGE FROM FY2022
There is a risk political instability
results in disruption and increased
protectionism in some of our
geographic markets. This could
impact the Group’s sales in to these
markets. There is a further risk that
our incoming supplies from these
markets could be blocked by
government action.
We regularly review order flow from our various geographic
markets and target new markets to mitigate the risk from
politically unstable regions.
The geographic spread of our customers limits the impact of any one
market on the results of the Group as a whole.
Following the closure of the Group’s facility in Shanghai the Group’s
production activities are all now located in either the UK or the US.
Our supply chain team actively seek new, alternative sources of
supply to reduce our dependence upon suppliers in unstable regions.
Sustainability, climate change and the environment
RISK
MITIGATION
CHANGE FROM FY2022
We do not deliver on our
commitments to enable a
sustainable future, leading
to reputational damage.
Our ESG agenda is closely monitored by the Board, supported by
the establishment of a Sustainability Board Committee in FY2023.
Our annual report updates our stakeholders on progress delivering
against our stated targets.
Our operations may be impacted
by the effects of climate change.
Net zero commitment published.
Engagement with our stakeholders to obtain feedback on their
concerns in this area, and on their views on our progress.
Security of materials supply
RISK
MITIGATION
CHANGE FROM FY2022
Shortages in certain commodities
such as electronic components
could have an effect on our ability to
manufacture products.
We utilise a number of sole source
suppliers in the business, and
certain of our suppliers are based in
higher risk regions. An interruption in
supply could have an adverse effect
on our manufacturing operations.
Export restrictions such as those
being imposed by China on certain
key raw materials could affect our
ability to produce.
We have invested in the supply chain during FY2023 with a new
global supply chain leader having joined the Group in April 2023.
Our supply chain team regularly monitor the availability of key
components and seek to put in place long term agreements with
critical suppliers to ensure continuity of supply. Buffer stocks are
held where necessary, although these would not be sufficient in the
event of a protracted delay in supply.
Our engineering teams work to identify and qualify alternative
sources of supply to mitigate risk where this is possible.
We have a supplier audit programme in place to identify supply chain
risk, and we work with our suppliers to mitigate those risks identified.
Order intake and global economic trends
RISK
MITIGATION
CHANGE FROM FY2022
There is a risk of destocking and
recession affecting demand for
some of our products, particularly
in the Industrial market.
Order book coverage is regularly reviewed in detail and regular
reviews are held of new business opportunities.
There are scheduled meetings between our site operations
teams and our business development staff to identify any
current unsold capacity.
90
Inflation
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
RISK
MITIGATION
CHANGE FROM FY2022
As FY2023 has progressed, we
have started to see inflation abate.
Our sales team works to pass on input price increases to customers
by increasing sales prices.
If inflation persists, it will continue
to have an effect on the Group’s
cost base through increased staff
costs, material costs and overheads,
including power costs. Our sales
team works to pass on input
price increases to customers by
increasing sales prices.
Our global supply chain team is closely monitoring purchase price
variances to identify price increases from suppliers. The team is
focused on achieving savings.
The risk in relation to utility prices appears to have reduced since the
prior year and our electricity prices in the UK are fixed through to
April 2025, which provides significant mitigation against the risk of
higher utility prices. We also have solar panels installed on all three
of our UK facilities, which reduces our demand.
In the US, our electricity prices are not fixed, but inflation levels there
have not been at the levels seen in the UK. The Group’s gas usage is
relatively insignificant, and not therefore a significant risk.
Competition
RISK
MITIGATION
CHANGE FROM FY2022
There is an ongoing risk of loss of
market share or price erosion due
to the activities of competitors in
our marketplaces. This could lead
to a reduction in revenue and/or
profitability.
There has not been a significant change to the competitive landscape
in FY2023, but this remains a key area of focus for the G&H
management team.
Maintenance of our product quality and on-time delivery
performance remain top priorities and we have seen a significant
reduction in past due backlog in the year.
We also seek to stay ahead of our competition by bringing new,
technologically superior products to the market. This will help us to
counteract the emergence of lower cost competitors in the market.
Our sustained investment in R&D enabled us to launch 57 new
products during FY2023.
The Group also has a continuous improvement plan in place which
targets increased efficiency and lower waste, ultimately aimed at margin
improvement. This, combined with our manufacturing footprint and
appropriate outsourcing strategy, is enabling more agile manufacturing,
thereby helping to sustain our cost competitiveness in the market.
Our business development teams maintain a strong presence in the
marketplace and attend key trade shows which enables them to
monitor competitor activity and respond accordingly.
Information and cyber security
RISK
MITIGATION
CHANGE FROM FY2022
There is a risk of loss of digital
intellectual property/data or our
ability to operate systems due to
internal failure or external attack.
Clear ownership of cyber risk and IT controls.
Data is appropriately stored and backed up with IT system recovery
plans in place. These plans are regularly tested.
Employee training programmes and regular communication have
been put in place to warn employees of the risk of cyber-crime.
STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES
91
Staff recruitment and retention
RISK
MITIGATION
CHANGE FROM FY2022
The Group recognises the
importance of retaining and
developing its workforce in order to
achieve its strategic objectives.
Whilst this remains a key risk, we
have seen this risk reduce in the
current financial year.
Our people are at the heart of our business. We have put in place
development and reward schemes to encourage individuals to play
a long-term role in the future development of the Group.
We have thorough onboarding processes for new employees to
help new starters to settle into their new roles.
Our HR teams review local market conditions on an ongoing basis
and take appropriate action where necessary.
Succession planning is reviewed by the senior management team
on a regular basis.
Production capacity management
RISK
MITIGATION
CHANGE FROM FY2022
One of our key challenges in the
prior year was matching output to
demand. We experienced difficulties
due to availability of labour in a
number of our sites, which affected
our ability to recruit to ramp up
production. We also continued to
experience staff absences due to
COVID, particularly in the first half
of the financial year.
Both of these challenges significantly
reduced in FY2023 and our sites
have been close to fully resources
for the majority of the FY2023.
The benefit of our senior appointments last year including a Chief
Operating Officer and new site Directors for two of our sites has clearly
been shown in FY2023. Our recent streamlining of the business
reduced complexity significantly and made the business more agile.
We have developed a recruitment and retention strategy for all sites,
and have added in-house recruiters to our HR teams where most
additional labour is required.
We are monitoring output from our manufacturing partners overseas
closely, and have an established team based full-time in Asia. We
intend to invest further in this team in FY2024.
Our sales and operations planning processes are continually being
refined to ensure we are operating as effectively as possible given
our demand profile.
M&A strategy
RISK
MITIGATION
CHANGE FROM FY2022
M&A remains a key part of our growth
strategy and we have an in-house
team who identify and review
opportunities in this regard with
assistance from an external
consultant where required. There is
a risk that we may not be able to
identify the right acquisition target to
enable the Group’s growth strategy.
There is also risk attached to the
performance and integration of
the two recent acquisitions made
by the Group.
Integration teams have been established in respect of the two recent
acquisitions. These teams meet on a regular basis to review progress
against agreed integration milestones. Our business development
and R&D teams are working closely with the acquired businesses to
drive synergies and create value.
Regular meetings continue to be held internally to review new
opportunities which present themselves and those which are
identified by our in-house team.
Acquisition targets are subject to full legal, financial, operational
and commercial due diligence prior to acquisition.
The strategic report has been approved by the Board of Directors and signed on its behalf by:
Charlie Peppiatt
Chief Executive Officer
5 December 2023
92
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Governance
GOVERNANCE
93
92–117
94 Board of Directors
96 Executive Management Team
98 Corporate Governance
102 Directors’ Report
106 Audit Committee Report
109 Nomination Committee Report
110 Remuneration Committee Report
94
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Board of
Directors
The right blend of
skills and experience
Charlie
Peppiatt
Chief Executive
Officer
Appointed
14 September 2022
Executive Director
Charlie Peppiatt assumed the position of Chief Executive Officer at
Gooch & Housego Plc in September 2022, steering the company
with a wealth of leadership experience. Before his tenure at G&H,
Charlie held the role of Executive Vice President at TT Electronics Plc
from 2018, a position he assumed following TT’s acquisition of
Stadium Group Plc. His leadership as CEO at Stadium, an AIM listed
company, spanned from 2013 until its acquisition by TT. Charlie’s
career trajectory also includes a significant stint as the Vice
President of Global Operations for Laird Plc, a prominent FTSE 250
electronics company. With an international perspective and senior
roles in cutting-edge industries serving the medical, telecoms,
industrial, and A&D sectors, Charlie brings a profound and diverse
experience to his pivotal leadership role at G&H.
Brian
Phillipson
Appointed
1 September 2015
Louise
Evans
Appointed
11 May 2020
Non-executive Director
Non-executive Director
Brian Phillipson, the Senior Independent Director, has extensive
A&D industry experience in both Strategic and Operational roles.
Previously, he held key roles within BAE Systems Plc and served as
a Board Member and Business Unit MD at Marshall Aerospace and
Defence Group. He also recently worked as CTO for Lilium GmbH.
Brian holds an MA (Hons) in Engineering from Cambridge University
and is a Fellow of the Royal Academy of Engineering and the Royal
Aeronautical Society. Brian chairs the Remuneration Committee and
is a member of the Audit and Nomination Committees of the G&H
Board. His strategic insight and operational expertise contribute
significantly to G&H’s governance.
Louise Evans, Chair of the Audit Committee, brings wide financial
leadership experience to G&H. She held Group Finance Director roles
at Braemar Shipping Services Plc and Williams Grand Prix Holdings
Plc. A Chartered Accountant, Louise is also a non-executive director
and Audit Committee Chair of AB Dynamics Plc and the International
Foundation for Aids to Navigation. Louise holds a bachelor’s degree
in Management Science from the University of Wales and is a Fellow
of the Institute of Chartered Accountants in England and Wales.
With a keen focus on financial governance, Louise oversees the
robustness of G&H’s financial reporting, systems and controls.
GOVERNANCE BOARD OF DIRECTORS
95
Chris
Jewell
Chief Financial
Officer
Appointed
9 September 2019
Executive Director
Gary
Bullard
Non-Executive
Chairman
Appointed
21 February 2018
Non-executive Director
Chris Jewell joined Gooch & Housego Plc as Chief Financial Officer in
September 2019, bringing with him a wealth of financial expertise to
the executive team. Before joining G&H, Chris served as the Group
Director of Financial Control at TT Electronics Plc, Senior Vice
President of Finance at Cobham Plc, and Finance Director of MBDA
UK. Chris has masters degrees from Cambridge University and the
London School of Economics and is a Fellow of the Institute of
Chartered Accountants in England and Wales. His multifaceted skill
set encompasses strategy, financial management, international
business, restructuring, with specialised expertise in the aerospace
and defence sector.
Gary Bullard, the Non-executive Chairman of G&H, brings a wealth of
experience from senior management positions at IBM, BT Group Plc
and Logica Plc. He held non-executive director roles at Chloride
Group Plc and Rotork Plc. Currently he also serves as the Chairman
of AFC Energy Plc and is a non-executive director of Spirent
Communications Plc. With a strategic and visionary approach, Gary
plays a crucial role in shaping the direction of G&H.
Jim
Haynes
Appointed
12 February 2021
Susan
Searle
Appointed
3 April 2023
Non-executive Director
Non-executive Director
Jim Haynes, with over 35 years experience in the optoelectronics
industry, holds a Bachelor’s Degree in Material Science from the
University of Wales. Jim has held senior management positions in
operations, engineering, and business at Nortel Networks, Agility
Communications, and Oclaro Plc. He was COO at Oclaro Plc and a
non-executive director at Andor Plc. Jim is a member of the Audit,
Remuneration, and Nominations Committees of the G&H Board.
Additionally, he serves as the non-executive director responsible for
the Board’s engagement with the workforce. Jim’s extensive industry
knowledge and operational expertise contribute significantly to
G&H’s strategic decisions.
Susan Searle, Chair of the Sustainability Committee, holds an MA in
Chemistry from Oxford University. A founder of Touchstone
Innovations Plc, she formerly served as its CEO. Susan has broad
experience on public and private company boards in engineering,
healthcare, and advanced materials. Susan was formerly Non-executive
Senior Independent Director and Remuneration Chair of Horizon
Discovery and Benchmark Holdings Plc, both technology businesses.
She also chaired two listed investment businesses - Mercia Asset
Management and Schroders UK public private. Currently, she holds
non-executive roles at QinetiQ Group Plc, Greenback Recycling
Technologies Limited, and Bibby Line Group. Susan is the
Remuneration Chair at QinetiQ and the Chair of Greenback Recycling
Technologies. She is also a member of the Audit, Remuneration, and
Nominations Committees of the G&H Board. Susan’s leadership in
environmental, social, and governance matters ensures G&H’s
commitment to sustainable and ethical business practices.
96
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Charlie
Peppiatt
Chief Executive
Officer
Appointed
2022
Board of
Executive
Management
Directors Charlie Peppiatt assumed the position of Chief Executive Officer at
Team
The right blend of
A skilled and
skills and experience
experienced team
Gooch & Housego Plc in September 2022, steering the company
with a wealth of leadership experience. Before his tenure at G&H,
Charlie held the role of Executive Vice President at TT Electronics Plc
from 2018, a position he assumed following TT’s acquisition of
Stadium Group Plc. His leadership as CEO at Stadium, an AIM listed
company, spanned from 2013 until its acquisition by TT. Charlie’s
career trajectory also includes a significant stint as the Vice
President of Global Operations for Laird Plc, a prominent FTSE 250
electronics company. With an international perspective and senior
roles in cutting-edge industries serving the medical, telecoms,
industrial, and A&D sectors, Charlie brings a profound and diverse
experience to his pivotal leadership role at G&H.
John
Andzulis
Chief Operating
Officer
Appointed
2022
Chris
Jewell
Chief Financial
Officer
Appointed
2019
Assuming the role of Chief Operating Officer at G&H in early 2022,
John Andzulis brings over 25 years of expertise in precision and
fibre optic manufacturing, supply chain, and engineering. His
diverse background includes notable positions at Ciena, Corning
Incorporated, and Rochester Precision Optics. John is passionately
dedicated to Lean manufacturing and supply chain optimisation,
holding a Bachelor of Science Degree in Industrial Engineering from
the Pennsylvania State University. His expertise spans operational
supply network design, M&A diligence and integration, enterprise
transformation, and talent development, making him a key driver of
G&H’s operational excellence.
Chris Jewell joined Gooch & Housego Plc as Chief Financial Officer in
September 2019, bringing with him a wealth of financial expertise to
the executive team. Before joining G&H, Chris served as the Group
Director of Financial Control at TT Electronics Plc, Senior Vice
President of Finance at Cobham Plc, and Finance Director of MBDA
UK. Chris has masters degrees from Cambridge University and the
London School of Economics and is a Fellow of the Institute of
Chartered Accountants in England and Wales. His multifaceted skill
set encompasses strategy, financial management, international
business, restructuring, with specialised expertise in the aerospace
and defence sector.
GOVERNANCE EXECUTIVE MANAGEMENT TEAM
97
Sarabjit
Singh
VP Global Sales and
Business Development
Appointed
2023
Stratos
Kehayas, PhD
Chief Product &
Technology Officer
Appointed
2013
Joining G&H in October 2023 as the VP of Global Sales & Business
Development, Sarabjit Singh brings over 27 years of exemplary
experience in commercial leadership. With a track record of success
at Keysight Technologies, Anite Telecoms, and Tata Consultancy
Services, Sarabjit is renowned for his strategic acumen, commercial
excellence, and operational proficiency. Throughout his career, he has
consistently delivered outstanding results, cultivating world-class
sales teams and driving substantial revenue and profitable growth
for the organisations he has served.
Dr. Efstratios (Stratos) Kehayas serves as the Chief Product &
Technology Officer, leading the global product management, R&D
and strategic marketing of G&H group. Dr. Kehayas holds a Ph.D.
from the National Technical University of Athens and a Master’s
degree in photonics from Imperial College London. As the co-founder
and Managing Director of Constelex Technology Enablers, a startup
acquired by G&H in 2013, he has significantly contributed to the
development of novel fibre-optic systems for satellite laser
communications and harsh environment fibre sensing. Stratos’ skills
include entrepreneurial leadership, cross-functional team leadership,
new product development, and strategic product marketing, making
him a driving force in G&H’s technological innovation.
Melinda
Chudleigh,
Chief People
Officer
Appointed
2023
Gareth
Crowe
Company Secretary
& Group Financial
Controller
Appointed
2014
Melinda Chudleigh serves as the Chief People Officer at G&H,
bringing 25 years of invaluable expertise in human resources and
organisational development. Her distinguished background includes
senior talent leadership roles at Mentor Graphics Corp, Novell Inc,
Qorvo, TT Electronics, and Xytech Systems. Melinda is recognised for
spearheading initiatives that enhance employee engagement and
talent development. Her unwavering commitment to creating
inclusive and supportive work environments aligns seamlessly with
G&H’s values, making her a key player in shaping and implementing
the company’s talent strategy.
Gareth Crowe has been an integral part of G&H since 2014, serving
as Company Secretary, Interim CFO and Group Financial Controller.
Gareth is a Fellow of the Institute of Chartered Accountants in
England and Wales, having qualified with PwC,
and has a degree in Accounting and Finance from Exeter University.
Prior to joining G&H, Gareth was a senior manager in PwC’s
Transaction Services team, where he provided financial due
diligence services on a wide range of global M&A deals. Gareth’s
areas of expertise include financial reporting, financial controls,
taxation, corporate governance and due diligence.
98
Corporate
Governance
Introduction
The Board is accountable to shareholders and is committed to
the highest standards of corporate governance. To this end,
the Group has adopted the UK Corporate Governance Code
(2018). The Code is available to download at www.frc.org.uk.
The Board of Gooch & Housego PLC reviewed its
corporate governance procedures at its September
2023 meeting. Following the actions taken in
previous years to ensure full compliance with the
Code, no further actions were required this year
and the Board consider the group to have fully
complied with the Code during the year ended
30 September 2023.
The Executive Directors have rolling service
contracts that are subject to either six or 12
months’ notice. The Chairman and non-executive
directors do not have contracts of service.
The terms of appointment of the Directors are
available for inspection during business hours
at the registered office of Gooch & Housego PLC
and are also available at the AGM.
How we Govern the Group
The Board leads the group’s governance framework.
It is responsible for setting the strategic targets
for the group, monitoring progress made,
approving proposed actions and for ensuring that
the appropriate internal controls are in place and
that they are operating effectively.
The Board is assisted by four principal committees
(Audit, Nomination, Remuneration and
Sustainability) each of which is responsible for
dealing with matters within its own terms of
reference, which are available on the group’s website.
The Board
The Board currently comprises two executive and
five non-executive directors. The directors holding
office during the period of this report and their
biographies are detailed from pages 94 to 95 and
are also available on our website; www.gandh.com.
All the non-executive directors are considered
by the Board to be independent of management
and free of any relationships which could materially
interfere with the exercise of their independent
judgement.
The Nomination Committee is responsible for
approving appointments to the Board. The Board
understands and recognises the benefits that
diversity can bring, and our recruitment partners
are briefed on our requirements in this regard.
Roles and Responsibilities
There is a documented clear division of
responsibilities between the Chairman and the
Chief Executive Officer to ensure that there is
a balance of power and authority between
leadership of the Board and executive leadership.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 GOVERNANCE CORPORATE GOVERNANCE
99
All Directors are entitled to seek independent, professional advice
at the Group’s expense in order to discharge their responsibilities
as Directors. Gooch & Housego PLC maintains appropriate
directors’ and officers’ insurance cover.
External Roles for Directors
The Board reviews the Directors’ external commitments on an
annual basis to ensure they are sufficiently available to enable
them to discharge their responsibilities, particularly if there were
exceptional circumstances that might require additional time at
short notice. The Board is cognisant that the Chairman, Gary
Bullard currently has three non-executive roles, two of which are
as Chairman (including G&H). He has assessed his time
commitments and confirmed to the Board that they do not hinder
his ability to discharge his responsibilities as Chairman of G&H.
Gary attended all of the scheduled Gooch & Housego PLC board
meetings during the year and has no other external commitments
other than his Board roles.
Board Activities
Day to day responsibility for the running of the Group is delegated
to executive management. However, there are a number of matters
where, because of their importance to the Group, it is not considered
appropriate to do this. The Board therefore has a documented
schedule of matters reserved for its decision. This schedule is
available on the Group’s web site.
The Board is responsible for setting the Group’s strategy.
The board calendar includes two strategy sessions per year.
At these sessions, members of the leadership team present
updates on strategic progress to the board in advance of wider
discussions which form the basis of our ongoing strategy. Further
details of our strategy can be found in the Strategic Report.
Board meeting attendance is presented in the following table.
Executive Directors
Charlie Peppiatt 9/9
Chris Jewell
9/9
Non-executive Directors
Gary Bullard
9/9
Brian Phillipson 9/9
Louise Evans
Jim Haynes
9/9
9/9
Susan Searle
4/4 Appointed 3 April 2023
Maintaining a Dialogue with Shareholders
The Chairman ensures that the Board maintains an appropriate
dialogue with shareholders. During FY2023, the Chairman met
with a number of major shareholders following the appointment of
Charlie Peppiatt late in the year ended 30 September 2022. Brian
Phillipson has also consulted with major shareholders on certain
remuneration matters during the year.
There are typically eight routine board meetings a year, with
additional meetings held as necessary to consider specific matters.
The Chief Executive Officer and the Chief Financial Officer
regularly meet with institutional investors to discuss strategic
issues and to make presentations on the Group’s results.
Meetings between the non-executive directors, without the executive
directors present are scheduled in the Board’s annual programme.
These meetings are encouraged by the Chairman and provide the
non-executive directors with a forum in which to share experiences
and to discuss wider business topics, fostering debate in Board and
committee meetings and strengthening working relationships.
The Board has established a procedure for Directors, if deemed
necessary, to take independent professional advice at the Group’s
expense in the furtherance of their duties. The Chairman ensures
that the Board is kept properly informed and is consulted on all
matters reserved to it. Board papers and other information are
distributed in a timely manner to allow Directors to be properly
briefed in advance of meetings.
In accordance with best practice, the Chairman addresses the
developmental needs of the Board as a whole, with a view to
further developing its effectiveness as a team, and ensures that
each Director refreshes and updates his or her individuals skills,
knowledge and expertise.
A formal, comprehensive and tailored induction is given to all
non-executive directors following their appointment, including
access to external training courses, visits to key locations within the
Group and meetings with members of the senior management team.
Brian Phillipson is the Senior Independent Director. His role includes
providing a sounding board for the Chairman and acting as an
intermediary for the non-executive directors, where necessary.
The Board believes that Brian has the appropriate experience,
knowledge and independence to continue this role.
In addition to the full and half year results, the Group publishes
Regulatory News Service announcements through the London
Stock Exchange.
The Group’s website contains an archive of information on the
Group’s history, leadership, governance, financial results, dividend
history and up to date share price information.
Although the non-executive directors are not formally required
to meet the shareholders of the Group, their attendance at the
Annual General Meeting and at presentations of the interim and
annual results is encouraged.
Engagement with the Workforce
Jim Haynes is our non-executive director with responsibility for
engagement with the workforce. During FY2023, Jim met with
employee groups from all of our sites, including the two recent
acquisitions. In the UK, employee communication groups were
already well established, and this model was extended as part of
this process, with the formation of groups in the US. We now have
employee representative groups on all G&H sites, and they will
play a key role going forward as a conduit for direct employee
communication with management and board. The site leaders and
HR partners were also present at these meetings. Jim invited
feedback from the groups on a diverse range of topics including
strategy, communications, G&H as an employer, and site specific
matters. In the case of the recent acquisitions, it was an ideal
opportunity to get employees’ first impressions of being part of
G&H, and on the integration process. The conversations were frank
and open, and the level of engagement was encouraging, particularly
since many of the actions identified are being addressed as part of
100
the Group’s new strategy. Jim collated and summarised the feedback
received and a detailed paper was presented at the October 2023
board meeting. Following the discussion thereof, a number of
actions have been identified. It was agreed that feedback would
be provided to the sites on this process during the all-employee
meetings to be held in FY2024. Jim will also write to each of the
employees involved to thank them for their participation and to
re-emphasise that the communication line remains open. The Board
is now evaluating how best to take this employee engagement
process forward during the current year and will report thereon
in next year’s Annual Report.
The Board reviews the organisation’s culture to ensure it is aligned
with the Group’s strategy. The Group’s Mission, Vision, Values and
Behaviours have been rolled out across the Group and further
strengthen the Group’s culture in support of its strategic aim. Further
information on our work in this regard is given in the ESG Report.
Other ways in which we ensure appropriate engagement with our
workforce are set out in the Strategic Report. These activities
enable the Board to gauge the Group’s culture and to make
changes where necessary to ensure it is aligned with our strategy.
Board Effectiveness
The Chairman is responsible, with assistance from the Nomination
Committee, for ensuring that the Company has an effective
Board with a suitable range of skills, expertise and experience.
Every year, a performance evaluation of the Board is carried out.
This year, the evaluation took place in September 2023, and was
led by the Senior Independent Director, Brian Phillipson, using
a formal structured questionnaire. The Board review showed
significant improvement over the range of areas covered in the
review. Areas identified for focus during FY2024 were Board
succession planning and formalising the approach to appraising
Executive Directors’ performance.
Committee and the Sustainability Committee. The Sustainability
Committee was newly formed in FY2023 and we will report on its
activities next year. A report on the activities of each of the other
committees follows later in this report.
Accountability
The Directors acknowledge that they are responsible for the
Group’s system of internal financial control. The system can
provide only reasonable, and not absolute, assurance against
material misstatements and losses.
G&H adopts a formal risk identification and management process
designed to ensure that risks are properly identified, prioritised,
evaluated and mitigated to the extent possible. A formal group
wide risk register is maintained and approved by the Board on
an annual basis. This year, the risk register was reviewed at the
March 2023 meeting following which a number of changes were
agreed. The risk disclosure was presented and approved at the
September 2023 meeting.
There are defined lines of responsibility and delegation of
authorities. There are also internal financial controls in existence
which are centrally maintained and documented and provide
reasonable assurance of the maintenance of proper accounting
records and the reliability of financial information used within
the business.
The Audit Committee is responsible for reviewing the effectiveness
of the Group’s financial reporting, internal control policies and
procedures for the identification, assessment and reporting of
risk. It is also responsible for advising the Board on whether the
Committee believes the Annual Report taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s performance,
business model and strategy.
The Senior Independent Director leads an annual appraisal of the
Chairman’s performance. This review took place during September
2023, using a formal questionnaire. Brian Phillipson collated the
feedback received and presented initially to the Chairman and
then to the Board.
The Group does not have an internal audit department.
Each year, finance staff independent of the site being visited,
perform detailed testing of compliance with the Group’s
comprehensive control framework. The results of this work were
summarised and presented to the Audit Committee in September
2023. This showed significant progress during the year.
The Board focuses on formulation of strategy, management of
effective business controls and review of business performance.
The Board is specifically responsible for the approval of annual and
interim results and interim management statements, acquisitions
and disposals, major capital expenditure, borrowings, director and
company secretary appointments and removals, any material
litigation, strategic forecasting and major development projects.
A framework of delegated authorities is in place that details the
structure of delegation below Board level and includes matters
reserved for the Board.
Board Committees
The Board has established a number of committees to assist in
the discharge of its duties. The formal terms of reference for the
principal committees can be found on the Group’s website.
The Board has four formally constituted committees, the Audit
Committee, the Remuneration Committee, the Nomination
Annual budgets and strategic plans are prepared for each business
unit. Financial and operational reports enable the Board to compare
performance against budget and to take action where appropriate.
Remuneration
The Remuneration Committee is responsible for setting
remuneration packages of the Executive Directors which are
designed to promote the long-term success of the Group and take
account of current corporate governance practice. The committee
ensures that performance related components of Executive
Director remuneration are transparent, stretching and rigorously
applied. The committee also monitors the level and structure of
remuneration for other senior management.
No director is involved in deciding his or her own remuneration.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 GOVERNANCE CORPORATE GOVERNANCE
101
102
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Directors’
Report
The Directors present their report together with the
audited consolidated financial statements for the year
ended 30 September 2023. The Directors who held
office during the year and up to the date of this report
are shown on pages 94 and 95.
A review of the development and performance of
the Group during the year and its future prospects
is set out in the Financial Highlights and in the
Financial Review. An outline of the business’s
principal activities, strategy and the Group’s
progress in the year towards these strategies is
given in the Strategic Report. An analysis of the
segmental information by market sector is given
in the Operations Review.
Key Financial Performance Indicators (KPIs)
The Group uses a selection of KPIs to monitor and
review the performance of the business. These are
detailed from page 22.
Dividends
During the year ended 30 September 2023 a final
dividend of 7.7p per share was paid for the previous
financial year. An interim dividend of 4.8p was paid
for the half year ended 31 March 2023 (2022: 4.7p).
For the year ended 30 September 2023, the
Directors have proposed a final dividend of
8.2p per share (2022: 7.9p).
Substantial Shareholdings
As at 15 November 2023, the following
shareholders had notified the Company that they
held an interest in 3% or more of its issued
ordinary share capital:
Shareholder
Number % holding
Octopus Investments
3,055,201
Odyssean Capital LLP
2,094,400
Canaccord Genuity Group Inc 1,958,515
Invesco
Rathbone plc
Royal London Mutual
Assurance Society
JM Finn & Co
Perpetual
abdrn plc
1,954,646
1,386,512
1,078,864
1,060,785
980,000
808,191
11.9%
8.1%
7.6%
7.6%
5.4%
4.2%
4.1%
3.8%
3.1%
Save for these interests, the Directors have not
been notified that any person is directly or
indirectly interested in 3% or more of the issued
ordinary share capital of the Company.
GOVERNANCE DIRECTORS’ REPORT
103
Treasury Policies
The Group’s treasury policies are designed to manage financial
risk to the Group that arises from operating in a number of foreign
currencies and to maximise interest income on cash deposits,
whilst maintaining the security of these deposits. As an
international group of companies, the main exposure is in respect
of foreign currency risk on the trading transactions undertaken
by group companies and on the translation of the net assets of
overseas subsidiaries. This exposure is principally to the US dollar.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and Company financial statements in
accordance with UK-adopted international accounting standards.
Monthly cash management reporting and forecasting is in place
to facilitate management of this currency risk. The operations of
group treasury take place at head office.
All balances not immediately required for group operations are
placed on short-term deposit with leading international highly
rated financial institutions.
At a transactional level, the Group seeks to offset its exposure
to foreign exchange movements by contracting with significant
supply partners in US Dollars and undertakes regular financial
reviews to assess whether it would be appropriate for the Group
to enter into currency hedging contracts to mitigate the currency
risk. During the year, the Group also entered into contracts to sell
US Dollars at specific rates in the future. Further details are given
in Note 29 to the financial statements.
The Group’s bank borrowings are denominated in US Dollars,
which acts as a partial hedge of a net investment against its
US Dollar denominated companies within the Group.
Further information on financial risk is given in note 29 to the
financial statements.
Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the group for that period. In preparing the financial
statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Research and Development
The Group has a continuing commitment to a high level of research
and development and invested £9.3m in R&D in the year ended 30
September 2023 (2022: £9.2m). This commitment is to actively
develop new technologies and capabilities that will become a key
part of the Group’s future product portfolio and revenue.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company and
enable them to ensure that the financial statements comply with
the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of
the Group’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Statement of Employment of Disabled Persons
The Group is committed to employment policies, which follow best
practice, based on equal opportunities for all employees, irrespective
of sex, race, colour, disability or marital status. Full and fair
consideration is given to applications for employment from disabled
persons, having regard to their particular aptitudes and abilities.
Employees who become disabled during their working life will be
retained in employment wherever possible and will be provided
help with any necessary rehabilitation and retraining. The Group
is prepared to modify procedures or equipment, wherever this is
practicable, so that full use can be made of an individual’s abilities.
Directors’ Indemnities
The Directors have the benefit of an indemnity which is a
qualifying third party indemnity provision as defined by
Section 234 of the Companies Act 2006. The indemnity was in
force throughout the last financial year and is currently in force.
The Group also purchased and maintained throughout the
financial year Directors’ and Officers’ liability insurance in
respect of itself and its Directors.
104
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 GOVERNANCE DIRECTORS’ REPORT
105
Directors’ Confirmations
The Directors consider that the annual report and financial
statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the group and parent company’s performance, business model
and strategy.
As a result of the assessments undertaken the Directors are satisfied
that the Group has adequate resources to continue in operational
existence for at least 12 months from the date of approval of the
financial statements. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
In the case of each director in office at the date the Directors’
Report is approved:
• so far as the Director is aware, there is no relevant audit
information of which the group and company’s auditors are
unaware; and
• they have taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant
audit information and to establish that the group and parent
company’s auditors are aware of that information.
Stakeholder Engagement
The ways in which we have engaged with our stakeholders in the
year are set out in our S172 Statement and our ESG Report. Our
streamlined energy and carbon reporting can be found on page 79.
Going Concern
The Directors have reviewed the current financial forecasts for
FY2024 and FY2025. They have assessed the future funding
requirements of the Group and compared them with available
borrowing facilities. They have also reviewed forecast performance
against our banking covenants. Details of the financial and
liquidity positions of the Group are given on page 64.
Viability Statement
The Directors have also assessed the viability and long-term
prospects of the Group for the period to September 2026 taking
into account the Group’s current position and the potential impact
of the principal risk and uncertainties set out on pages 88 to 91
of this Report.
Business planning processes within G&H require the preparation
of detailed financial plans as part of an annual review and update
of the Group’s three-year strategic plan, a process in which all
functions are involved. The Group’s strategy is developed, and
capital investment decisions are made, based on cash flow
forecasts over a three year horizon.
The Group’s strategy is key to understanding its prospects. Further
details of the strategy can be found in the Strategic Report. By
focussing on diversification in to attractive adjacent markets with
our sub assembly and systems capabilities, thereby reducing the
Group’s dependency upon the Industrial laser market and by
creating differentiated products and capabilities through our R&D
investment we are making the Group sustainable for the long term.
The Group’s geographical and sector diversification helps to reduce
the impact of many of the risks that the Group faces. Furthermore,
the Group’s revenue is not overly concentrated with any particular
customers or markets.
At 30 September 2023, the Group has a strong balance sheet with
net current assets of £55.8m. The Group’s cash and undrawn
committed and uncommitted facilities totalled £36.3m.
We have determined that the period to September 2026 represents
an appropriate period over which to provide the viability
statement as this aligns with the business cycle and order intake
trends of the Group.
The Directors have reviewed severe but plausible downside
scenarios that estimate the potential impact of the principal risks
that the Group faces (see pages 88 to 91 of this report) on the
financial forecasts. These include the impact of a possible recession
and the resultant reduced demand in certain of the Group’s
markets, most notably commercial aerospace and the Industrial
laser market driven by softness in consumer end market demand.
They also included the effect of erosion of sales prices due to
competition, the impact of delays to our production ramp up, the
impact of inflation on input costs which cannot be passed on to
customers, the potential impact of a cyber-attack and a reduction
in forecast revenue to illustrate the potential effect of a loss of key
personnel or inability to hire for a key role. The model also
considered the loss of revenue and profit associated with a closure
of one of our sites due to a legal non-compliance issue. This
assessment covered not only the coming 12 month period but also
for the period to September 2026 in order to support the Viability
Statement given below.
We have compared the downside risk adjusted cash projections
and covenant performance against the Group’s available cash and
borrowing facilities and have been able to conclude that the Group
would continue to be able to operate even if a number of the risks
occurred simultaneously.
As described above we have stress tested the Group’s financial
projections for the period covered by the viability statement,
testing it for the severe but plausible risks that the business faces.
This assessment confirmed that the Group would continue to be
able to operate even if a number of the risks occurred
simultaneously.
Based upon these assessments the Directors confirm that at the
time of approving the financial statements, there is a reasonable
expectation that the Group will have adequate resources to
continue in operation over the period to September 2026.
Approved and signed on behalf of the Board of Directors by:
Charlie Peppiatt
Director
5 December 2023
106
Audit
Committee
Report
Membership
The Audit Committee is chaired by Louise Evans, a Chartered
Accountant with significant recent experience in senior finance
roles, and who the Board are therefore satisfied has recent and
relevant experience. The Committee comprises Louise Evans,
Brian Phillipson, Jim Haynes and Susan Searle and is considered
to have had an appropriate balance between those individuals
with finance or accounting training and those from a general
business background.
How the Committee Operates
The Committee met three times during the year as part of its
standard schedule to consider matters planned around the
Group’s financial calendar. Attendance at those meetings is
summarised below:
Non-executive Directors
Louise Evans
Brian Phillipson
Jim Haynes
Susan Searle
3/3
3/3
3/3
2/2
Appointed 3 April 2023
At the invitation of the Committee, representatives of the external
auditors, PricewaterhouseCoopers LLP, attended meetings together
with the Chairman, Chief Executive Officer, Chief Financial Officer,
and the Company Secretary. The Committee also seeks to meet
regularly with the external auditor without the Executive Directors
in attendance. During the year, the Committee met twice with
representatives from PricewaterhouseCoopers LLP without others
being present.
Responsibilities
The role and responsibilities of the Committee are set out in its
terms of reference, which are available on the Group’s website and
from the Company Secretary on request. The terms of reference
are reviewed annually by the Committee.
The principal responsibilities of the Committee are:
• Reviewing the effectiveness of the Group’s financial reporting,
internal control policies and procedures for the identification,
assessment and reporting of risk;
• Reviewing the results of internal controls testing and verification;
• Advising the Board on whether the Committee believes the
Annual Report taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s performance, business model
and strategy;
• Considering and making recommendations to the Board as to the
appointment, reappointment or removal of the external auditors
and the approval of their remuneration and terms of engagement;
• Assessing the external auditors’ independence and objectivity
and the effectiveness of the audit process; and
• Reviewing the policy on the engagement of the external auditors
to supply non-audit services.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 GOVERNANCE AUDIT COMMITTEE REPORT
107
Financial Reporting
During the year, the Audit Committee reviewed the
appropriateness of the Group’s interim and full year
financial statements, including the consideration
of significant financial reporting judgements made
by management taking into account reports from
management and the external auditors. The main
areas of focus considered by the Committee during
the year were as follows:
AREA OF FOCUS
Acquisition accounting
CONCLUSION
The Committee has reviewed the judgements taken in the accounting
for the acquisitions of GS Optics and Artemis Optical in the year,
particularly in relation to the valuation of acquired intangible assets,
and is satisfied that the approach taken is reasonable.
AREA OF FOCUS
Going concern
AREA OF FOCUS
Inventories
The Committee reviewed management’s going concern
assessment and viability statements.
The Committee reviewed management’s estimates in relation to
inventory valuation and obsolescence.
CONCLUSION
CONCLUSION
The Committee reviewed management’s funding forecasts and the
stress testing that had been performed on them, based upon the
Group’s principal risks and uncertainties. The Committee concluded
that it was appropriate that the financial statements were prepared
on a going concern basis and that a viability statement confirming
that there is a reasonable expectation that the Group will have
adequate resources to continue in operation over the period to
September 2026 could be included in the Annual Report.
AREA OF FOCUS
Goodwill impairment reviews
Management perform annual impairment reviews of the carrying
value of goodwill. These impairment reviews are based on future
projected cash flows and are therefore inherently judgmental.
The Audit Committee reviewed the key judgements underpinning
the impairment reviews performed.
CONCLUSION
The Committee has reviewed the value in use calculations prepared
by management for the US and ITL CGUs.
The Committee has reviewed the sensitivity disclosures in note 18
and concluded that they are appropriate.
The Committee reviewed the level of inventory at the year end, which
has increased in the year, noting the additional safety stocks being
held due to current supply chain challenges.
The Committee was satisfied that the provisions made adequately
reflected the risk of impairment.
AREA OF FOCUS
Non-underlying items
The Committee considered the appropriateness of the measure
of adjusted profits, quality of earnings, and the classification and
transparency of items separately disclosed as non-underlying items.
CONCLUSION
The Committee was satisfied that the presentation of adjusted profit
before tax provides a reasonable view of the underlying performance
of the Group and that there was transparent and consistent
disclosure of items shown separately as non-underlying items.
This was based on a review of the items added back in arriving
at underlying profit.
The Committee was satisfied the FRC’s guidance discouraging
companies from excluding charges and credits associated with the
pandemic from alternative performance measures had been followed.
AREA OF FOCUS
AREA OF FOCUS
Long term contract accounting
and revenue recognition
Fair, balanced understandable and
comprehensive reporting
Some of the Group’s sites are engaged in long term development
contracts. These contracts must be traded based upon an estimate
of the contracts’ outturn profitability which requires estimation and
judgement.
CONCLUSION
Approximately 4% of the Group’s revenue in the year was related
to long term contracts. The Committee considered the procedures
in place to monitor both the stage of completion and the outturn
profitability of long term contracts within the Group. It also reviewed
the procedures in place for the correct segregation of costs between
contracts.
After careful consideration the Committee concluded that the
judgements and estimates made in this regard were reasonable.
CONCLUSION
The Committee has reviewed the Annual Report and is comfortable
that it provides a fair, balanced and understandable review of the
year ended 30 September 2023.
As part of this review, the Committee has considered the alternative
performance measures presented, and the degree of prominence
given thereto in relation to statutory measures. The Committee
has also considered the ESG disclosures and other reports to ensure
that a fair review has been given.
108
Financial Systems and Controls
The Committee reviewed the results of the internal
controls testing conducted by the finance team
during the year. This work showed that significant
progress has been made on the Group’s internal
controls since a revised framework was rolled out in
the year ended 30 September 2021. The Committee
noted the areas requiring improvement identified
by the testing and were satisfied that an
appropriate plan is in place to do so.
During the year, the Committee reviewed and
approved the latest delegation of authority
framework in order to ensure appropriate
controls are in place for the approval of certain
matters and actions relating to expenditure,
contractual exposure and other potential liabilities
to the Group.
The Committee also reviewed the latest risk register
and is satisfied that appropriate mitigating actions
have been taken.
External Auditors
Under its terms of reference, the Committee is
responsible for assessing the scope, fee, objectivity
and effectiveness of external audits and for making
a recommendation to the Board regarding the
appointment, reappointment or removal of the
auditors on an annual basis.
The Group appointed Grant Thornton to provide its
global tax services during the year ended 30
September 2021 in response to the FRC’s Revised
Ethical Standard 2019 which prevents auditors of
AIM listed businesses such as G&H from providing
non-audit services to those businesses.
We believe the independence of the auditors has
been enhanced by this change, and the auditors
continue to be required to make a formal report
to the Audit Committee on an annual basis on the
safeguards that are in place to maintain their
independence and the internal safeguards in place
to ensure their objectivity.
We reported our intention to tender the audit service
for the year ending 30 September 2024 in last
year’s Annual Report. During the year, we invited
five major accounting firms as well as the incumbent
auditor to tender for the provision of audit services.
The Chief Financial Officer and Chair of the Audit
Committee met with representatives of these
firms. We were unable to complete a reasonable
and effective tender process because the majority
of firms declined to tender as they had insufficient
capacity to complete the audit. We will therefore
re-appoint PricewaterhouseCoopers LLP as
auditors for the year ending 30 September 2024.
Our incumbent audit partner is rotating off of the
engagement so we will have a new partner leading
the audit for the year ending 30 September 2024.
The Audit Committee is satisfied and this and
PricewaterhouseCoopers LLP’s other
independence safeguards mean that despite their
long tenure, PricewaterhouseCoopers LLP’s
independence and effectiveness is not affected.
The Audit Committee will keep this matter under
review and will tender for the provision of audit
services as soon as the opportunity arises.
Approval
Louise Evans
Chair of the Audit Committee
5 December 2023
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 GOVERNANCE NOMINATION COMMITTEE REPORT
109
Nomination
Committee Report
The Nomination Committee, which consists of the
Chairman, all non-executive directors and the Chief
Executive Officer, is responsible for the composition
of the Board, and other senior management matters.
Role of the Committee
• Reviews the composition of the Board and its committees.
Membership and Attendance
at Meetings Held in FY2023
• Considers succession planning for Directors and other senior
executives and in doing this considers diversity, experience,
knowledge and skills.
• Identifies and recommends for Board approval suitable
candidates to be appointed to the Board.
Non-executive Directors
Gary Bullard
Brian Phillipson
Louise Evans
Jim Haynes
Susan Searle
1/1
1/1
1/1
1/1
0/0
Appointed 3 April 2023
• Considers the gender balance of those in senior management
and their direct reports.
Executive Directors
Charlie Peppiatt
1/1
Areas of Focus for the Nomination Committee During FY2023
• Recruitment of Susan Searle, non-executive director.
Approval
Gary Bullard
Chairman of the Nomination Committee
5 December 2023
• Succession planning for other members of the Board.
• Diversity in the senior management team. Further details in this
regard can be found in our Corporate Governance Report.
Appointment Process
As reported last year, the Committee determined that with only
a single female representative on the Board, we did not have
sufficient diversity and determined that we should appoint an
additional female non-executive director. Warren Partners were
selected to conduct the search based on the selection criteria
set by the Nomination Committee. Warren Partners duly
identified a diverse list of candidates from a range of industries
and backgrounds for initial appraisal by the Committee. From this,
a shortlist of suitable candidates were interviewed and Susan
Searle was recommended to the Board as the preferred candidate.
Susan was appointed on 3 April 2023.
110
Remuneration
Committee Report
Annual Statement (unaudited)
Dear Shareholder
I am pleased to introduce the Remuneration
Committee Report for FY2023. This report is
divided into three sections, being:
• This Annual Statement, which summarises the work of
the Committee, remuneration outcomes in FY2023 and
how the Remuneration Policy will be operated for FY2024;
• The Remuneration Policy, which summarises the
Company’s current Remuneration Policy; and
• The Annual Report on Remuneration, which discloses how
the Remuneration Policy was implemented in FY2023.
Membership and Meeting Attendance in FY2023
Non-executive Directors
Brian Phillipson (Chairman)
Gary Bullard
Louise Evans
Jim Haynes
Susan Searle
4/4
4/4
4/4
4/4
2/2
Appointed
3 April 2023
Operation of the Remuneration Committee
It is an objective of the Group to attract and retain
high calibre Directors and employees and reward
them in a way which encourages the creation
of value for shareholders while also fully meeting
the expectations of shareholders and governance
standards. Although not a member of the
Committee, the Chief Executive Officer submits
a report outlining proposals and is usually invited
to present the report to the Committee. After
presenting the report he withdraws from the
meeting and does not participate in the decision
making or voting processes. The Committee has
three scheduled meetings each year to deal with
ordinary business. In addition to these, the
Committee meets on an ad hoc basis when
necessary to deal with additional matters.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
GOVERNANCE REMUNERATION COMMITTEE REPORT
111
Advisors to the Committee
FIT Remuneration Consultants LLP (“FIT”) advised the
Remuneration Committee on certain matters during the year. FIT
is a member and signatory of the Remuneration Consultants Group
and voluntarily operates under the Code of Conduct in relation to
executive remuneration consulting in the UK, details of which can
be found at www.remunerationconsultantsgroup.com. FIT provides
no other services to the Company and the Committee is satisfied
that FIT have no conflicts of interest with G&H or its Directors.
Activities during the year
• Reviewed the FY2022 Remuneration Committee Report prior to
its approval by the Board.
• Reviewed performance against the FY2022 annual bonus plan
targets and resulting awards and agreed the metrics and targets
for the FY2023 bonus plan.
• Reviewed and set targets for the FY2023 LTIP awards.
• Reviewed and renewed the Gooch & Housego Long Term
Incentive Plan (LTIP)*.
* As the LTIP reached the end of its ten-year life earlier in the year,
the Committee took the opportunity to renew the share plan for
a further ten-years. A number of changes were made to the LTIP
rules to modernise and align with best and market practice.
Those changes included the introduction of a dividend equivalent
provision and enhancing malus and clawback provisions to add
corporate failure and insolvency triggers, in line with the current
UK Corporate Governance Code. We have not made any significant
changes to vesting or holding periods, maximum potential award
levels, or change of control and leaver provisions.
Performance and Reward for FY2023
The Group had a much improved year in FY2023, having
successfully completed two acquisitions and reported an increase in
adjusted profit before tax from £8.1m to £9.6m, an increase of
17.5%. This meant that the profit element of the Executive Directors’
short term incentive scheme was partially met, although the cash
flow target was not achieved. I am pleased to report that very good
progress was made in respect of the Executive Directors’ personal
objectives element of the annual bonus award. As a result, annual
bonuses were awarded to the CEO and CFO at 65% and 62.5% of
salary respectively. No LTIP awards vested in FY2023.
Implementing the Remuneration Policy for FY2024
In respect of the implementation of the Remuneration Policy for
the CEO and CFO in FY2024:
Base Salary: The Committee reviewed the Executive Directors’
salaries at its October 2023 meeting. It agreed to increase the
salary of both Charlie Peppiatt and Chris Jewell by 3% with effect
from 1 January 2024. This increase is in line with that given to the
wider UK workforce.
Pension: Pension provision will continue to be provided at 6% of
salary (workforce aligned).
Annual Bonus: Annual bonus will continue to be capped at 100%
of salary albeit we have adjusted weightings to improve the
linkage with key drivers for our revised strategy, encouraging an
increased focus on cash and on steps to achieve year on year
growth not just annual financial results. Accordingly, for FY2024,
the cash target will account for 30% of the bonus plan, with the
EPS element reduced to from 60% to 50%. Personal objectives
will continue to account for the remaining 20%, and it was agreed
that these would be linked to the four pillars of the Group’s revised
strategy for the coming year. The Committee also approved a
change to performance criteria of the financial elements such that
pay out will commence at achievement of 90% of the target with
maximum entitlement being achieved at 110% of target. Pay-out
will be linear between those two levels.
LTIPs: LTIP Award levels for FY2024 will continue to be set at
120% of base salary for the CEO and CFO and vest after three
years, subject to achievement of performance targets and a
two-year post vesting holding period will operate. Performance
metrics will continue to be based on sliding scale Total Shareholder
Return (“TSR”) targets for 50% of awards, EPS targets for 40% of
awards and ESG targets for 10% of awards. However, reflecting
input from shareholders and noting the views of the major
shareholder representative bodies, the Committee has agreed to
set relative rather than absolute TSR targets going forward. TSR
will be measured against the constituents of the AIM100. Specific
targets will be disclosed retrospectively in our Annual Report.
Shareholding guidelines: No changes have been made to our
shareholding guideline policy which is considered to be well
aligned to AIM best practice and which are detailed in the
Remuneration Policy section of this report.
Remuneration and Retention of the Wider Workforce
At the October 2023 Committee meeting, the Committee reviewed
the salary levels of the senior management team. It recommended
to the CEO a number of performance related adjustments be made
with effect from 1 January 2024. The Committee also reviewed the
proposed level of awards to be made to the senior management
team under the LTIP scheme. A key aim of this review continues
to be ensuring there is an appropriate alignment between the
remuneration of Directors and that of the senior management
team. The Committee is satisfied that this is the case.
The Committee is satisfied that our combination of salary, bonus
and annual long-term incentive schemes provides a good mix of
incentives and rewards in both the short, medium and long terms.
Furthermore, we believe our remuneration framework is effective
in driving behaviours that are consistent with our Group values
and strategy and is fully in line with external governance
requirements and expectations. The Committee is satisfied that
the remuneration of the Executive Directors is appropriate based
on its review of industry reports on remuneration and input
received from FIT during the year. The Committee is also satisfied
that the factors outlined in Provision 40 of the UK Corporate
Governance Code have been adhered to; the existing policy
provides clarity, simplicity, predictability, proportionality and
avoids reputational risk.
The Committee values all feedback from shareholders and hopes
to receive your support at the forthcoming AGM.
112
Remuneration Policy (unaudited)
The table below summarises our policy for
FY2023 and its implementation for FY2024:
ELEMENT OF REMUNERATION
Base Salary
ELEMENT OF REMUNERATION
Annual Bonus
ELEMENT OF REMUNERATION
Pension
PURPOSE AND LINK TO STRATEGY
PURPOSE AND LINK TO STRATEGY
PURPOSE AND LINK TO STRATEGY
Takes into account experience and
personal contribution to the Group’s
strategy Attracts and retains executives
of the quality required to deliver the
Group’s strategy.
Incentivise achievement of short-term
financial targets that the Committee
considers to be critical drivers of
business growth.
Provide employees with market
competitive pension scheme.
FY2023 POLICY AND APPROACH
FY2023 POLICY AND APPROACH
FY2023 POLICY AND APPROACH
• Reviewed annually with changes effective
• Awarded annually
• Defined contribution personal
from 1 January if applicable
• Consideration given to individual and
Group performance
• General pay increases across the
wider workforce are also taken into
consideration
• Where the Group considers it appropriate
and necessary, larger increases may be
awarded in exceptional circumstances
• Based on broad performance measures
• Up to 60% payable for exceeding target
EPS by 10%. Nil if not met
• 20% of bonus payable for achieving
target operating cash flow.
Nil if not met.
• Up to 20% of bonus payable for
achievement of personal objectives half
of which are linked to ESG metrics.
pension plan
• Executive Directors are entitled to
employer pension scheme contributions
of 6% of salary, which is consistent with
the wider UK workforce.
OPPORTUNITY
OPPORTUNITY
OPPORTUNITY
Base salary increases are applied in line
with the outcome of the annual review.
Maximum of 100% of base salary.
6% of base salary from 1 October 2023.
The Committee keeps the benefit policy
and benefit levels under regular review.
FY2024 POLICY AND APPROACH
FY2024 POLICY AND APPROACH
FY2024 POLICY AND APPROACH
The Remuneration Committee approved
a 3% increase to the Executive Directors’
salaries effective from 1 January 2024.
This increase is in line with that given to
the wider workforce.
No changes proposed.
The Committee has agreed to change the
proportion of the bonus scheme linked to
the cash target to 30%. The EPS element
will reduce from 60% to 50% accordingly.
These elements of the bonus will also move
to a sliding scale pay-out between 90%
and 100% of target.
Personal objectives are now tied more
closely to company strategy.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 GOVERNANCE REMUNERATION COMMITTEE REPORT
113
ELEMENT OF REMUNERATION
Long Term
Incentive Plan (LTIP)
ELEMENT OF REMUNERATION
Shareholding
Guidelines
PURPOSE AND LINK TO STRATEGY
PURPOSE AND LINK TO STRATEGY
Incentivise executive performance over
the longer term.
To promote share ownership for
Executive Directors.
Performance measures linked to the
long-term strategy of the business and
the creation of shareholder value over the
longer term.
FY2023 POLICY AND APPROACH
FY2023 POLICY AND APPROACH
• Awards vest after three years subject to
achievement of targets, and are then
subject to a two-year holding period.
• Absolute TSR for 50% of awards, with full
vesting at 15% TSR per annum.
• The EPS target accounts for 40% of
awards. Full vesting at 15% EPS growth
per annum.
• 15% growth per annum target is in line
with the Board’s objective of doubling the
size of the Group over a period of 5 years.
• Achievement of the Group’s ESG agenda
accounts for 10% of awards.
• Awards may vest pro rata following
retirement.
OPPORTUNITY
Award levels are determined by reference
to an individual’s position and performance.
Annual awards of 120% of base salary for
the CEO and the CFO.
Maximum award of 300% of base salary
where an exceptional case may arise (e.g.
on recruitment).
• In-employment: The CEO and CFO are
required to hold 200% and 100% of
salary respectively in G&H shares to be
built up through shares vesting under the
LTIP over time.
• Post cessation: Executive Directors are
required to hold shares with a value
of 100% of salary for one year post
cessation (excluding shares already held
on appointment, any shares vesting in
relation to the LTIP granted prior to 30
September 2021, or those purchased by
Directors).
REQUIREMENT
In-employment:
CEO: 200% of salary
CFO: 100% of salary
Post cessation: 100% of salary for one year
post cessation.
FY2024 POLICY AND APPROACH
FY2024 POLICY AND APPROACH
No changes proposed.
Relative TSR target introduced for
FY2024, accounting for 50% of awards
relative to the performance of the AIM100.
40% will continue to be based on EPS
targets, with the remaining 10% based on
ESG targets.
The 15% annual growth target for full
vesting has been retained.
114
Directors’ Remuneration (Audited)
2023
Executive
C Peppiatt
C Jewell
Non-executive
G Bullard
B Phillipson
L Evans
J Haynes
S Searle 1
Basic pay
£’000
Performance
related bonus
£’000
Benefits
in kind
£’000
Pension
contribution
£’000
Sub-total
2023
£’000
Total fixed
remuneration
Total variable
remuneration
£’000
£’000
405
286
87
49
49
49
25
950
250
175
–
–
–
–
–
425
25
11
–
–
–
–
–
36
–
10
–
–
–
–
–
10
680
482
87
49
49
49
25
1,421
430
307
87
49
49
49
25
996
250
175
–
–
–
–
–
425
2022
Basic pay
Performance
related bonus
£’000
£’000
Benefits
in kind
£’000
Pension
contribution
£’000
Sub-total
2022
£’000
Total fixed
remuneration
Total variable
remuneration
£’000
£’000
Executive
C Peppiatt
C Jewell
M Webster 2
Non-executive
G Bullard
B Phillipson
L Evans
J Haynes
21
268
345
83
47
47
47
858
The above disclosure has been audited.
–
43
–
–
–
–
–
43
–
11
13
–
–
–
–
24
–
10
–
–
–
–
–
10
21
332
358
83
47
47
47
935
21
289
358
83
47
47
47
892
–
43
–
–
–
–
–
43
1 Susan Searle was appointed 3 April 2023.
2 Mark Webster retired as a Director of the Company on 13 September 2022, but remained in
employment until 30 September 2022.
Compensation for Loss of Office (Audited)
Mark Webster was paid compensation for loss of office equivalent to one year’s base salary and company
pension contributions totalling £366,000 in October 2022.
Remuneration (Audited)
Executive Directors are paid a base salary together with annual bonus payments based on the
achievement of Group profitability, cash and personal, operational and ESG related targets. In addition,
Executive Directors participate in a long-term incentive scheme and receive benefits in kind, including
medical expenses and insurance.
Non-executive directors are paid a fee to attend board meetings and to serve as members of the Board
as well as the Audit, Nomination, Remuneration and Sustainability committees. Further payments may
be made in respect of additional services provided at the request of the Group. No such further payments
were made in FY2023 or FY2022. The Board approved an increase to the non-executive directors’
salaries of 3% with effect from 1 January 2024.
Benefits (Audited)
Executive Directors receive private health insurance, life assurance and long-term disability insurance.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
GOVERNANCE REMUNERATION COMMITTEE REPORT
115
2023 Performance Related Bonuses (Audited)
Bonuses in 2023 were based 60% on EPS, 20% on operating cash flow and 20% on personal strategic
objectives. Details of the performance achieved against the EPS and cash flow targets are shown in the
table below:
Financial targets
EPS target (adjusted diluted)
Adjusted operating cash flow
target
Threshold
target
28.4p
£19.4m
Maximum
target
32.0p
£19.4m
% payable
at max
Performance
outcome
% bonus
awarded
60%
20%
31.0p
£18.2m
45.0
–
The EPS target was partially met, meaning that 45% of the 60% available for that element of the bonus
was payable. The cash flow target was not met. No discretion was applied to these outcomes.
Personal strategic objectives, which accounted for 20% of the bonus opportunity, were set at the start of
the year. These were subject to review and approval by the Remuneration Committee. They are focused
on a range of activities which are key to enabling our strategic objectives.
Details of the objectives set are summarised in the table below:
Charlie Peppiatt, CEO
Chris Jewell, CFO
• Perform full strategic review and agree the Group’s new strategy
• Achieve ESG targets set by the Board.
with the Board.
• Achieve ESG targets set by the Board.
• Continue the Group’s internal controls testing programme and
achieve a set reduction in the number of exceptions identified.
• Achieve specified targets related to improving customer
• Achieve targets related to working capital efficiency.
experience to enable sales growth.
• Oversee implementation of plan to deliver operational
excellence, optimised supply chains and continuous
improvement across the Group.
The view of the Remuneration Committee is that excellent progress was made against the objectives set.
Specifically the Committee noted that while the working capital targets had not been achieved, the other
objectives had been delivered fully. Following due discussion at the November 2023 Remuneration
Committee meeting, the Committee approved achievement levels of 20% out of the maximum 20% of
the bonus for the CEO Charlie Peppiatt and 17.5% for Chris Jewell.
Directors’ Pension Arrangements (Audited)
The rate of Group pension contributions for executive directors is 6%. The policy is in line with the UK
Corporate Governance Code 2018 which recommends that contribution rates for Executive Directors, or
payments in lieu thereof, should be aligned with those available to the workforce.
During the year the Group contributed to a money purchase pension scheme on behalf of the executive
Directors. The number of Directors who are currently accruing benefits under a pension scheme is 1
(2022: 1). Charlie Peppiatt is currently entitled to Group pension contributions of 6% of his basic salary,
although he sacrificed this entitlement for an increase in salary of the same amount. Chris Jewell is
entitled to Group pension contributions of 6% of his basic salary, although he has sacrificed part of that
entitlement for an increase in salary of the same amount.
Directors’ Contracts (Unaudited)
The Executive Directors have rolling service contracts. The Chief Executive Officer’s contract is subject to
twelve months’ notice and the Chief Financial Officer’s contract is subject to six months’ notice. The
Chairman and non-executive directors do not have contracts of service.
116
Malus and Clawback (Unaudited)
Both the Long Term Incentive Plan and Annual Bonus scheme have malus and clawback clauses.
These clauses permit the Remuneration Committee to reduce or cancel amounts due under these
schemes at any time prior to payment or up to three years after payment if specific circumstances apply.
These circumstances include the Director being dismissed for gross misconduct, the results of the Group
being materially misstated, an error being identified in the performance conditions for the payments, or
if the Remuneration Committee believe there to be circumstances giving rise to a reputational risk arising
for the Group. As noted earlier in this report, we have also now introduced malus and clawback clauses to
the long term incentive plan related to corporate failure and / or insolvency. The Committee does also
have a degree of discretion to apply malus and clawback to situations not specifically defined if
considered appropriate.
Long Term Incentive Plan (Audited)
There were no vesting or exercises under the Long Term Incentive Plan by the Directors in either the year
ended 30 September 2022 or 30 September 2023.
Director Shareholdings (Audited)
The Directors’ beneficial interests in the issued ordinary share capital of the Company were as follows:
Executive Directors
Charlie Peppiatt
Chris Jewell
Non-executive Directors
Gary Bullard
Brian Phillipson
Louise Evans
Jim Haynes
Susan Searle
Number of shares at
30 September 2023
% of salary
As at 30 September 2023
Number of shares at
30 September 2022
% of salary
As at 30 September 2022
5,000
5,715
38,581
3,460
473
–
2,700
6%
10%
N/A
N/A
N/A
–
N/A
–
1,278
22,567
3,460
473
–
–
–
3%
N/A
N/A
N/A
–
–
Shareholding Guidelines (Unaudited)
Executive Directors are required to maintain a qualifying interest in the ordinary shares of the Company.
The Chief Executive Officer and the Chief Financial Officer are required to hold 200% and 100% of salary
respectively in G&H shares, a holding which is expected to be built up through shares vesting under the
LTIP over time. The Directors are not permitted to sell shares vesting under the LTIP unless the specified
shareholding has been achieved, other than sale of shares to satisfy tax obligations.
Executive Directors are required to hold shares with a value of 100% of salary for a period of one year post
cessation of employment at G&H. This requirement does not apply to shares already held by Executive
Directors on appointment, any shares vesting in relation to the LTIP granted prior to 30 September 2021,
or those purchased by Directors.
The shares purchased via the bonus scheme for Chris Jewell in the year ended 30 September 2022 will not
be considered to be a personal purchase and therefore will not be excepted from the holding requirements.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
GOVERNANCE REMUNERATION COMMITTEE REPORT
117
The Gooch & Housego 2013 Long Term Incentive Plan (Audited)
The existing Gooch & Housego 2013 LTIP was adopted on 9 April 2013. Under the plan, awards will be
made annually to Directors and key employees based on a percentage of salary or management grade.
Subject to the satisfaction of the required TSR, EPS and ESG performance criteria, these grants were to
vest three years after the grant date. For any vesting shares in relation to all extant awards, after sales to
satisfy tax obligations, 50% must be held for a further year and 50% must be held for a further two years.
The exercise price of all awards is nil.
Date of
grant
At
01.10.2022
Awarded
in year
Exercised
in year
Lapsed
At
30.09.2023
Expiry
Date
Number of ordinary shares under option
09.01.2023
–
175,090
13.01.2020
07.01.2021
07.01.2021
13.01.2022
09.01.2023
25,245
22,839
18,686
24,360
–
–
–
–
–
70,698
–
–
–
–
–
–
–
175,090
09.01.2026
(25,245)
–
(18,686)
–
–
–
22,839
–
24,360
70,698
13.01.2024
07.01.2025
07.01.2024
13.01.2025
09.01.2026
Executive
C Peppiatt
C Jewell
C Jewell
C Jewell
C Jewell
C Jewell
The Gooch & Housego 2013 Long Term Incentive Plan specifies that the Company will operate within the
standard dilution limit of 10% of the Company’s issued share capital over a 10 year period, and the
Company will continue to do so.
The Gooch & Housego PLC Save As You Earn Scheme (Audited)
The Gooch & Housego PLC Save As You Earn Scheme was established in February 2021 and is open to
all UK employees. The scheme allows participants to save up to a maximum of £100 per month over the
three year vesting period. Participants commit to a fixed monthly savings amount at the start of the
savings period and are granted options at a 10% discount to the market price of Gooch & Housego PLC
shares on the date of commencement of the vesting period. There were no grants of options under the
SAYE scheme during the year ended 30 September 2022 or 2023. For the Executive Directors, take-up
of this SAYE scheme has been as follows:
Date of
grant
At
01.10.2022
Awarded
in year
Exercised
in year
Lapsed
At
30.09.2023
Expiry
Date
Number of ordinary shares under option
Executive
C Jewell
26.03.2021
310
–
–
–
310
26.03.2025
During the year ended 30 September 2023, £337,000 (2022: £743,000) was charged to the income
statement in respect of the IFRS 2 share-based payments charge on all share option schemes and a
charge of nil (2022: credit £17,000) in respect of employer’s national insurance contributions, based on a
year end share price of £4.95 (2022: £5.75).
Brian Phillipson
Chairman of the Remuneration Committee
5 December 2023
118
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Financial
Statements
FINANCIAL STATEMENTS
119
118–181
120
Independent Auditors’ Report
128 Group Income Statement
129 Group Statement of Comprehensive Income
130 Group Balance Sheet
131 Group Statement of Changes in Equity
132 Group Cash Flow Statement
133 Notes to the Group Cash Flow Statement
135 Notes to the Group Financial Statements
164 Company Balance Sheet
165 Company Statement of Changes in Equity
166 Company Cash Flow Statement
167 Notes to the Company Cash Flow Statement
168 Notes to the Company Financial Statements
Image: SpaceX/Unsplash 120
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Independent
Auditors’ Report
To the members of
Gooch & Housego PLC
Report on the audit of the financial statements
Opinion
In our opinion, Gooch & Housego PLC’s Group financial statements
and Company financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the
Company’s affairs as at 30 September 2023 and of the Group’s
profit and the Group’s and Company’s cash flows for the year
then ended;
• have been properly prepared in accordance with UK-adopted
international accounting standards as applied in accordance
with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the
Annual Report, which comprise: the Group Balance Sheet and
the Company Balance Sheet as at 30 September 2023; the Group
Income Statement, the Group Statement of Comprehensive
Income, the Group Statement of Changes in Equity, the Company
Statement of Changes in Equity, the Group Cash Flow Statement,
and the Company Cash Flow Statement for the year then ended;
and the notes to the financial statements, which include a
description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in
the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard,
as applicable to other listed entities of public interest, and we
have fulfilled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
We have provided no non-audit services to the Company
or its controlled undertakings in the period under audit.
FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT
121
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including
those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed
in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Acquisition accounting, including the identification and
valuation of intangible assets and goodwill is a new key audit
matter this year. Otherwise, the key audit matters below are
consistent with last year.
Our audit approach
Overview
Audit scope
• The UK audit team performed full scope audit procedures in
respect of three operating units based in the USA (Gooch &
Housego (Palo Alto) LLC, EM4 Inc., and Gooch & Housego
(Ohio) LLC) and three operating units in the UK (Integrated
Technologies Limited, Gooch & Housego (Torquay) Limited
and Gooch & Housego (UK) Limited).
• Taken together, these six reporting units (post consolidation
entries) account for 86% of the Group’s revenue.
• Additional procedures were also performed at Group level in
respect of centralised processes and functions, including the
audit of consolidation journals. Specified procedures were
performed by the UK audit team over certain other balances
and transactions within the Company, Gooch & Housego PLC,
and G&H US Holdings Ltd, along with analytical procedures
on all of the remaining reporting units.
Key audit matters
• Recoverability of the Group goodwill (Group).
• Acquisition accounting, including the identification and valuation
of intangible assets and goodwill (Group).
• Recoverability of the Company’s investments in subsidiaries
(Company).
Materiality
• Overall Group materiality: £1,484,000 (2022: £1,248,000)
based on 1% of Group revenues.
• Overall Company materiality: £662,300 (2022: £376,000)
based on 1% of total assets.
• Performance materiality: £1,113,000 (2022: £936,000) (Group)
and £496,700 (2022: £282,000) (Company).
122
Recoverability of the Group goodwill (Group)
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
As at 30 September 2023, the Group Balance
Sheet includes £59.7m of intangible assets
(2022: £47.9m), of which £45.1m is goodwill
(2022: £35.6m), and £14.6m amortised
intangible assets (2022: £12.3m).
Goodwill in the Group is significant, and
the estimated recoverable amount of these
balances is subjective due to the inherent
uncertainty involved in forecasting and
discounting future cashflows. The impairment
reviews therefore include significant estimates
and judgements in respect of future growth
rates, cash flows and discount rates. The
sensitivity of these key assumptions are
detailed in note 18, Intangible assets.
We obtained management’s assessment of the recoverable amount of each CGU, including
cashflow forecasts supporting management’s calculation of value in use and assessed the
appropriateness of key assumptions. We considered the methodology used by management
in performing the assessments and challenged key inputs.
• We have obtained evidence behind the forecasts in order to challenge the key judgements
and estimates;
• We have agreed the impairment model to the Board approved 3-year strategic plan and tested
the mathematical accuracy of the model;
• We have compared revenue forecasts against current order books, including verifying a sample of
orders to customer purchase orders. We have further assessed whether the forecast revenues
and EBITDA margins are reasonable by comparing them to historical trends and by considering
the accuracy of management’s historic forecasting;
• We have considered plausible downside sensitivities to assess if there is still appropriate
headroom under different scenarios;
• We have used our in-house valuation experts to consider the appropriateness of the discount
rate and long-term growth rate used compared to the wider market and sector benchmarks; and
• We have also assessed the reasonableness of the assumed long-term growth rate in light of
external market studies relevant to the Group.
Based upon our audit work, we are satisfied that the assumptions in the value in use model are
reasonable and concur with the assessment performed. We consider that the carrying value of
the goodwill balance is fairly stated based on materiality and that the disclosures in the Financial
Statements are appropriate.
Acquisition accounting, including the identification
and valuation of intangible assets and goodwill (Group)
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
On 20 June 2023, the Group acquired the entire issued share capital of
GS Optics LLC (“GS Optics”), a specialist in the custom design and
manufacture of precision polymer optics for use in the biomedical,
machine vision and analytical instrument markets. The cost of
acquisition of GS Optics was largely funded through the issue of
ordinary G&H shares with a value of £2.1m, cash consideration of $11.1m,
$0.2m of deferred consideration and a working capital true-up payable
in cash. Contingent consideration of up to $1.85m may be payable
based on the achievement of certain earnings targets up to 31
December 2023 however the Directors do not believe such targets will
be met. On 21 July 2023, the Group acquired the entire issued share
capital of Artemis Optical Holdings Limited (“Artemis”), a thin-film
coating company based in the United Kingdom. The cost of acquisition
of Artemis was largely funded through the issue of ordinary G&H shares
with a value of £2.4m, cash consideration of £3.1m, £0.3m of deferred
consideration, a working capital true-up payable in cash, plus contingent
consideration of up to £2.0m based on the achievement of certain
earnings targets, payable over the next two years.
The fair values ascribed to the intangibles assumed can be highly
judgemental. Other assets and liabilities are generally less judgemental
and not considered part of our significant risk assessment. We focus on
the accounting for these transactions because they are material to the
consolidated financial statements of the Group and because there is a
degree of judgement in the identification and valuation of the assets
and liabilities acquired. The amount of goodwill recognised is dependent
on the valuation of the intangible assets. Refer to note 32, Business
Combinations. The intangible assets recognised on acquisition have
been disclosed in note 18, Intangible assets.
We have worked alongside our internal valuation experts to assess the
appropriateness of the valuation analysis prepared by the directors to
calculate the fair value of the intangible assets used in the business
combination accounting. This included:
• Assessing the appropriateness of the methodology applied, and
integrity of the discounted cash-flow used to determine the fair value of
the intangibles assets in the business combination. We corroborated
cash flows to Board approved forecasts;
• Challenging the key assumptions made by management in determining
the fair values of assets identified, in particular, the forecast EBITDA
and discount rates, including benchmarking of discount rates, and the
attrition rates;
• Challenging the key assumptions made by management in determining
the fair values of consideration recognised, including the assessment
and calculation of contingent consideration;
• Assessing the Group’s disclosures regarding the acquisition and
estimation assumptions and whether they had been disclosed
appropriately.
We concur with the assessment performed and consider the fair values
ascribed to the intangibles to be reasonably stated.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT
123
Recoverability of the Company’s investments
in subsidiaries (Company)
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
As at 30 September 2023, investments in
subsidiaries included in the Company Balance
Sheet was £43.2m (2022: £35.7m). In
accordance with the requirements of IFRS
(IAS36 – Impairment of Assets), at the end of
each reporting period management are
required to assess whether there is any
indication that the Company’s investments in
subsidiaries may be impaired. As a result of this
exercise, no indicators have been identified.
We have considered whether there are any indicators of impairment, including comparing to
current market capitalisation.
In order to support that there are no impairment triggers we obtained the relevant subsidiaries’
cash flow forecasts supporting management’s assessments and evaluated the appropriateness
of key assumptions, including the procedures set out in the Goodwill impairment assessment
(Group).
We assessed the methodology used by management in performing the assessments and
challenged and evaluated key inputs. We concur with the assessment performed and consider
the carrying value of the investment balance to be fairly stated.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to
understand the extent of the potential impact of climate risk on
the Group’s financial statements and we remained alert when
performing our audit procedures for any indicators of the impact
of climate risk. Our procedures did not identify any material impact
as a result of climate risk on the Group’s and Company’s financial
statements. We also reviewed management’s consideration of
the impact of climate events occurring on the Group’s ability to
continue as a going concern.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Group and the Company, the accounting processes and controls,
and the industry in which they operate.
The Group has eight main operating units located in the United
States of America (USA) and the United Kingdom (UK), each of
which contribute more than 5% of Group revenues. The central
finance and accounting team is located in the UK and is responsible
for the financial reporting of Gooch & Housego PLC (the “Company”).
Gooch & Housego (Palo Alto) LLC and Gooch & Housego (Torquay)
Limited are considered to be financially significant components of
the Group due to the significant revenues earned by these entities.
Although not financially significant, we have further considered
EM4 Inc., Gooch & Housego (Ohio) LLC, Integrated Technologies
Limited, and Gooch & Housego (UK) Limited to be significant risk
components due to the revenues earned and the highly material
balances within these entities. Full-scope audits of each of these
six entities’ financial information has been carried out.
Additional procedures were also performed at Group level in
respect of centralised processes and functions, including the audit
of consolidation journals. Specified procedures were performed
by the UK audit team over certain other balances and transactions
within the Company, Gooch & Housego PLC, and G&H US Holdings
Ltd, along with analytical procedures on all of the remaining
reporting units. Our audit addressed components making up 86%
of the Group’s revenues with the audit of all components being
performed by the Group engagement team.
For the purposes of the Company audit this consists of one reporting
unit which was subject to a full scope audit in accordance with our
Company materiality.
124
Materiality
The scope of our audit was influenced by our
application of materiality. We set certain
quantitative thresholds for materiality. These,
together with qualitative considerations, helped
us to determine the scope of our audit and the
nature, timing and extent of our audit procedures
on the individual financial statement line items
and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we
determined materiality for the financial
statements as a whole as follows:
Overall materiality
FINANCIAL STATEMENTS – GROUP
FINANCIAL STATEMENTS – COMPANY
£1,484,000 (2022: £1,248,000).
£662,300 (2022: £376,000).
How we determined it
FINANCIAL STATEMENTS – GROUP
FINANCIAL STATEMENTS – COMPANY
1% of Group revenues.
1% of total assets
Rationale for benchmark applied
FINANCIAL STATEMENTS – GROUP
FINANCIAL STATEMENTS – COMPANY
Overall materiality in the current year
has been based on 1% of the Group’s
revenue. This is in line with the prior
year and is considered the most
appropriate benchmark. We have also
considered this benchmark in relation
to other similar sized AIM listed entities
in similar industries and performed a
benchmarking assessment to ensure
its appropriateness.
We determined our materiality based on
total assets, which is more applicable than
a performance-related measure as the
Company is primarily an investment holding
company for the Group and does not have
any revenues as a result. In the prior year we
restricted this as part of our Group scoping
exercise however in the current year chose
instead to only perform work over large
balances for Group scoping purposes.
For each component in the scope of our Group
audit, we allocated a materiality that is less than
our overall Group materiality. The range of
materiality allocated across components was
between £280,000 and £1,200,000.
We use performance materiality to reduce to an
appropriately low level the probability that the
aggregate of uncorrected and undetected
misstatements exceeds overall materiality.
Specifically, we use performance materiality in
determining the scope of our audit and the nature
and extent of our testing of account balances,
classes of transactions and disclosures, for example
in determining sample sizes. Our performance
materiality was 75% (2022: 75%) of overall
materiality, amounting to £1,113,000 (2022:
£936,000) for the Group financial statements
and £496,700 (2022: £282,000) for the
Company financial statements.
In determining the performance materiality, we
considered a number of factors - the history of
misstatements, risk assessment and aggregation
risk and the effectiveness of controls - and concluded
that an amount at the upper end of our normal
range was appropriate.
We agreed with those charged with governance
that we would report to them misstatements
identified during our audit above £74,200 (Group
audit) (2022: £62,000) and £33,000 (Company
audit) (2022: £19,000) as well as misstatements
below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the
Group’s and the Company’s ability to continue to
adopt the going concern basis of accounting included:
• Evaluation of management’s going concern
assessment and related disclosure in the financial
statements.
• Evaluation of the Group’s forecast financial
performance, liquidity and covenant compliance
over the going concern period.
• Evaluation of stress testing performed by
management in their downside scenario and
consideration of whether the stresses applied are
appropriate for assessing going concern.
• Validation of the terms of the current banking
facilities.
Based on the work we have performed, we have
not identified any material uncertainties relating to
events or conditions that, individually or collectively,
may cast significant doubt on the Group’s and the
Company’s ability to continue as a going concern
for a period of at least twelve months from when
the financial statements are authorised for issue.
In auditing the financial statements, we have
concluded that the directors’ use of the going
concern basis of accounting in the preparation of
the financial statements is appropriate.
However, because not all future events or conditions
can be predicted, this conclusion is not a guarantee
as to the Group’s and the Company’s ability to
continue as a going concern.
In relation to the directors’ reporting on how they
have applied the UK Corporate Governance Code,
we have nothing material to add or draw attention
to in relation to the directors’ statement in the
financial statements about whether the directors
considered it appropriate to adopt the going
concern basis of accounting.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT
125
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
• The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report,
any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. If we identify an
apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a
material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
Report for the year ended 30 September 2023 is consistent with
the financial statements and has been prepared in accordance
with applicable legal requirements.
In light of the knowledge and understanding of the Group and
Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
Strategic report and Directors’ Report.
Corporate governance statement
ISAs (UK) require us to review the directors’ statements in relation
to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s
compliance with the provisions of the UK Corporate Governance
Code, which the Listing Rules of the Financial Conduct Authority
specify for review by auditors of premium listed companies. Our
additional responsibilities with respect to the corporate
governance statement as other information are described in the
Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
• The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and
an explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether
they considered it appropriate to adopt the going concern basis
of accounting in preparing them, and their identification of any
material uncertainties to the Group’s and Company’s ability to
continue to do so over a period of at least twelve months from
the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the Group’s
and Company’s prospects, the period this assessment covers and
why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the Group and Company was substantially less in
scope than an audit and only consisted of making inquiries and
considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant
provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the financial statements
and our knowledge and understanding of the Group and Company
and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess
the Group’s and Company’s position, performance, business
model and strategy;
• The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
• The section of the Annual Report describing the work of the audit
committee.
We have nothing to report in respect of our responsibility to report
when the directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
• Evaluation of management’s controls designed to prevent and
detect irregularities, in particular the whistleblowing policy and
employee code of conduct;
• Challenging assumptions and judgements made by management
in their significant accounting estimates;
• Identifying and testing journal entries, in particular journal
entries posted with unexpected account combinations
• Designing audit procedures to incorporate unpredictability
around the nature, timing or extent of our testing; and
• Reviewing financial statement disclosures and testing to
supporting documentation to assess compliance with applicable
laws and regulations.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related
to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion about
the population from which the sample is selected.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities
This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
126
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’
Responsibilities, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as
they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or the Company
or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud,
is detailed below.
Based on our understanding of the Group and industry, we
identified that the principal risks of non-compliance with laws and
regulations related to health and safety and employment laws, and
we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the
financial statements such as AIM listing regulations, financial
reporting regulations, taxation legislation and the Companies Act
2006. We evaluated management’s incentives and opportunities
for fraudulent manipulation of the financial statements (including
the risk of override of controls), and determined that the principal
risks were related to posting unusual journal entries to increase
revenue and profits or the manipulation of accounting estimates
which could be subject to management bias. Audit procedures
performed by the engagement team included:
• Confirmation and enquiry of management and those charged
with governance over compliance with laws and regulations,
including consideration of actual or potential litigation and
claims;
• Reading board minutes for evidence of breaches of regulations
and reading any relevant correspondence;
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT
127
Other required reporting
Other voluntary reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
• we have not obtained all the information and explanations we
require for our audit; or
Directors’ remuneration
The Company voluntarily prepares a Remuneration Committee
Report in accordance with the provisions of the Companies Act
2006. The directors requested that we audit the part of the
Remuneration Committee Report specified by the Companies Act
2006 to be audited as if the Company were a quoted company.
• adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
In our opinion, the part of the Remuneration Committee Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
• certain disclosures of directors’ remuneration specified by law
are not made; or
• the Company financial statements are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Jason Clarke (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Cardiff
5 December 2023
128
Group Income
Statement
For the year ended 30 September 2023
Note
Underlying
30 September 2023
Non-underlying
(Note 13)
£’000
–
–
–
–
–
(4,494)
–
–
(4,494)
–
(57)
(4,551)
Total
Underlying
£’000
148,476
(104,454)
44,022
(9,274)
(10,259)
(18,474)
–
835
6,850
11
(1,841)
5,020
£’000
124,802
(85,741)
39,061
(9,181)
(8,697)
(12,879)
–
560
8,864
–
(717)
8,147
30 September 2022
Non-underlying
(Note 13)
£’000
–
–
–
–
–
(3,695)
(6,726)
Total
£’000
124,802
(85,741)
39,061
(9,181)
(8,697)
(16,574)
(6,726)
–
560
(10,421)
–
–
(10,421)
(1,557)
–
(717)
(2,274)
747
(972)
(1,326)
1,590
264
£’000
148,476
(104,454)
44,022
(9,274)
(10,259)
(13,980)
–
835
11,344
11
(1,784)
9,571
(1,719)
7,852
(3,804)
4,048
31.3p
31.0p
(15.2p)
(15.0p)
16.1p
16.0p
6,821
27.2p
27.0p
(8,831)
(2,010)
(35.2p)
(35.0p)
(8.0p)
(8.0p)
Revenue
Cost of revenue
Gross profit
Research and development
Sales and marketing expenses
Administration expenses
Impairment of goodwill and
acquired intangible assets
Other income
Operating profit/(loss)
Finance income
Finance costs
Profit/(loss)before income
tax (expense)/income
Income tax
(expense)/income
Profit/(loss) for the year
Basic earnings/(losses)
per share
Diluted earnings/(losses
per share
6
18
8
6
11
11
12
15
15
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS GROUP FINANCIAL STATEMENTS
129
Group Statement of
Comprehensive Income
For the year ended 30 September 2023
Profit/(loss) for the year
Other comprehensive income/(expense) – items that may be
reclassified subsequently to profit or loss
Gains/(losses) on cash flow hedges
Currency translation differences
Other comprehensive (expense)/income for the year net of tax
Total comprehensive (expense)/income for the year attributable
to the shareholders of Gooch & Housego PLC
Note
27
27
2023
£’000
4,048
1,287
(5,801)
(4,514)
(466)
2022
£’000
(2,010)
(1,137)
9,774
8,637
6,627
130
Group Balance
Sheet
As at 30 September 2023
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Income tax liabilities
Net current assets
Non-current liabilities
Borrowings
Lease liabilities
Provisions for other liabilities and charges
Deferred consideration
Deferred income tax liabilities
Net assets
Shareholders’ equity
Called up share capital
Share premium account
Merger reserve
Cumulative translation reserve
Hedging reserve
Retained earnings
Total equity
The financial statements for Gooch & Housego PLC, registered number
00526832, on pages 128 to 163 were approved by the Board of
Directors on 5 December 2023 and signed on its behalf by:
Charlie Peppiatt
Director
Chris Jewell
Director
Note
16
17
18
25
19
20
21
22
23
23
23
23
24
32
25
26
27
27
27
27
27
2023
£’000
41,818
9,932
59,729
2,178
113,657
37,582
34,075
7,294
78,951
(21,156)
(10)
(1,443)
(581)
(23,190)
55,761
(28,157)
(9,394)
(1,582)
(870)
(9,682)
(49,685)
119,733
5,159
16,051
11,561
10,027
15
76,920
119,733
2022
£’000
42,447
5,063
47,939
1,969
97,418
37,073
35,598
5,999
78,670
(22,765)
(64)
(1,732)
(578)
(25,139)
53,531
(18,730)
(4,539)
(848)
–
(8,291)
(32,408)
118,541
5,008
16,000
7,262
15,828
(1,272)
75,715
118,541
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS GROUP FINANCIAL STATEMENTS
131
Group Statement of
Changes in Equity
For the year ended 30 September 2023
Note Called up share
capital
£’000
5,008
–
–
–
–
–
–
Share
premium
account
£’000
16,000
Merger
reserve
£’000
7,262
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
Hedging
reserve
£’000
80,087
(2,010)
–
£’000
(135)
–
(1,137)
Cumulative
translation
reserve
£’000
6,054
–
9,774
Total
equity
£’000
114,276
(2,010)
8,637
(2,010)
(1,137)
9,774
6,627
(3,105)
743
(2,362)
–
–
–
–
–
–
(3,105)
743
(2,362)
5,008
16,000
7,262
75,715
(1,272)
15,828
118,541
5,008
16,000
7,262
–
–
–
–
151
–
151
–
–
–
–
51
–
51
–
–
–
–
4,299
–
4,299
75,715
4,048
–
(1,272)
–
1,287
15,828
–
(5,801)
118,541
4,048
(4,514)
4,048
1,287
(5,801)
(466)
(3,180)
–
337
(2,843)
–
–
–
–
–
–
–
–
(3,180)
4,501
337
1,658
5,159
16,051
11,561
76,920
15
10,027
119,733
At 1 October 2021
Loss for the financial year
Other comprehensive
expense/(income) for
the year
Total comprehensive
(expense)/income for
the year
Dividends
Share-based payments
Total contributions by and
distributions to owners
of the parent recognised
directly in equity
At 30 September 2022
At 1 October 2022
Profit for the financial year
Other comprehensive
income/(expense) for
the year
Total comprehensive
income/ (expense) for
the year
Dividends
Shares issued
Share-based payments
Total contributions by and
distributions to owners
of the parent recognised
directly in equity
At 30 September 2023
14
28
14
26
28
132
Group Cash Flow
Statement
For the year ended 30 September 2023
Cash flows from operating activities
Cash generated from operations
Income tax repaid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Purchase of property, plant and equipment
Sale of property, plant and equipment
Purchase of intangible assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Drawdown of borrowings
Repayment of borrowings
Principal elements of lease payments
Interest paid*
Dividends paid to ordinary shareholders
Net cash generated from/(used in) financing activities
Net increase/(decrease) in cash
Cash at beginning of the year
Exchange (losses)/gains on cash
Cash at the end of the year
* Interest paid in the year ended 30 September 2022 of £717,000 has
been reclassified from investing activities to financing activities.
2023
£’000
16,164
2
16,166
(11,697)
(6,257)
516
(1,062)
11
(18,489)
19,154
(8,378)
(1,624)
(1,784)
(3,180)
4,188
1,865
5,999
(570)
7,294
2022
£’000
6,084
456
6,540
–
(6,669)
–
(1,899)
–
(8,568)
6,300
(1,312)
(1,584)
(717)
(3,105)
(418)
(2,446)
8,352
93
5,999
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS GROUP FINANCIAL STATEMENTS
133
Notes to the Group
Cash Flow Statement
For the year ended 30 September 2023
Reconciliation of cash generated from operations
Profit/(loss) before income tax
Adjustments for:
- Amortisation of acquired intangible assets
- Amortisation of other intangible assets
- Impairment of intangible assets
- Loss on disposal of property, plant and equipment
- Write back of lease creditor on early termination of lease
- Depreciation
- Share based payment charge
- Amounts claimed under the RDEC
- Finance income
- Finance costs
- Non cash interest charge included in finance costs
Total
Changes in working capital
- Inventories
- Trade and other receivables
- Trade and other payables
Total
Cash generated from operating activities
Reconciliation of net cash outflow to movement in net debt
Increase/(decrease) in cash in the year
Drawdown of borrowings
Repayment of borrowings
Changes in net cash resulting from cash flows
New leases
Translation differences
Non cash movements
Acquired debt due after 1 year
Acquired leases
Movement in net debt in the year
Net debt at 1 October
Net debt at 30 September
2023
£’000
5,020
1,672
1,692
–
234
–
7,652
337
(200)
(11)
1,841
(57)
13,160
(1,291)
1,005
(1,730)
(2,016)
16,164
2023
£’000
1,865
(19,154)
10,298
(6,991)
(3,305)
1,443
(392)
(54)
(3,345)
(12,644)
(19,066)
(31,710)
2022
£’000
(2,274)
1,903
1,438
6,726
71
(96)
7,102
743
(200)
–
717
–
18,404
(5,557)
(5,707)
1,218
(10,046)
6,084
2022
£’000
(2,446)
(6,300)
3,144
(5,602)
(25)
(4,031)
(165)
–
–
(9,823)
(9,243)
(19,066)
134
Notes to the Group
Cash Flow Statement Continued
For the year ended 30 September 2023
Analysis of net debt
At 1 Oct 2022
Cash flow
New leases
Cash at bank and in hand
Debt due within 1 year
Debt due after 1 year
Leases
Net debt
£’000
5,999
(64)
(18,730)
(6,271)
(19,066)
£’000
1,865
8,378
(19,154)
1,920
(6,991)
£’000
-
-
-
(3,305)
(3,305)
Exchange
movement
£’000
(570)
1
1,552
460
1,443
Arising on
acquisition
£’000
-
-
(54)
(3,345)
(3,399)
Non-cash
movement
At 30 Sep 2023
£’000
-
(8,325)
8,229
(296)
(392)
£’000
7,294
(10)
(28,157)
(10,837)
(31,710)
At 1 Oct 2021
Cash flow
New leases
Cash at bank and in hand
Debt due within 1 year
Debt due after 1 year
Leases
Net debt
£’000
8,352
(65)
(10,903)
(6,627)
(9,243)
£’000
(2,446)
1,312
(6,300)
1,832
(5,602)
£’000
-
-
-
(25)
(25)
Exchange
movement
£’000
Arising on
acquisition
£’000
Non-cash
movement
£’000
93
-
(2,999)
(1,125)
(4,031)
-
-
-
-
-
-
(1,311)
1,472
(326)
(165)
At 30 Sep 2022
£’000
5,999
(64)
(18,730)
(6,271)
(19,066)
The non-cash movements in the above tables include debt
arrangement fees and movements between amounts due
within one year and after one year due to the lapse of time.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
135
Notes to the Group
Financial Statements
For the year ended 30 September 2023
1. General information
Gooch & Housego PLC (the Company) is a public limited company
limited by shares incorporated and domiciled in the United
Kingdom. The Company is listed on the Alternative Investment
Market (AIM) of the London Stock Exchange. The address of the
registered office of the Company is given on page 184.
The consolidated financial statements of the Group for the year
ended 30 September 2023 comprise the Company, Gooch &
Housego PLC, and its subsidiaries (together referred to as the
Group). A listing of the Company’s subsidiaries is set out on page 172.
We have compared the downside risk adjusted cash and banking
covenant projections and against the Group’s available cash and
borrowing facilities and have been able to conclude that the Group
would continue to be able to operate even if a number of the risks
occurred simultaneously.
The Directors have also considered the potential impact of climate
change on going concern and have concluded that there is not
expected to be any material impact on the business during the
going concern period
The Group is a manufacturer of specialist optoelectronic
components, materials and systems and specialist instrumentation
and life sciences devices. The Group has facilities in the United
Kingdom, Germany and the United States.
As a result of the assessments undertaken the Directors are
satisfied that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of
approval of the financial statements. For this reason they continue to
adopt the going concern basis in preparing the financial statements.
2. Basis of preparation
These financial statements have been prepared under the
historical cost convention as modified by financial assets and
financial liabilities at fair value and in accordance with UK adopted
International Accounting Standards and with the requirements of
the Companies Act 2006 as applicable to companies reporting
under those standards.
Going concern
The financial statements have been prepared on a going
concern basis.
3. Application of IFRS
Adoption of new standards
The following amended standards and interpretations were effective
for the financial year ended 30 September 2023, however, they have
not had a material impact on our consolidated financial statements:
• Annual Improvements 2018-2020.
• Narrow scope amendments to IFRS 3, IAS16 and IAS38.
None of the amendments to the above standards had a material
impact on the Financial Statements.
The Directors have reviewed the budget for FY2024 and the
strategic plan for FY2025. They have assessed the future funding
requirements and covenant performance of the Group and
compared them with available borrowing facilities. Details of the
financial and liquidity positions of the Group are given on page 64.
The following other amended standards and interpretations have
been issued but were not mandatory for the financial year ended
30 September 2023. These are not expected to have a material
impact on the consolidated financial statements.
At 30 September 2023 the Group has a strong balance sheet with
net current assets of £55.8m. The Group’s cash and undrawn
available facilities totalled £36.3m.
• Narrow scope amendments to IAS1, IAS 8 and IFRS Practice
Statement 2.
• Amendments to IAS 12 ‘Taxation’.
The Directors have reviewed severe but plausible scenarios that
estimate the potential impact of the principal risks that the Group
faces (see pages 88 to 91 of this report) on the financial forecasts.
These include the impact of a possible recession and/or further
waves of the pandemic, and the resultant reduced demand in certain
of the Group’s markets, most notably commercial aerospace and
the Industrial laser market driven by softness in consumer end
market demand. They also included the effect of erosion of sales
prices due to competition, the potential impact of a cyber-attack
and a reduction in forecast revenue to illustrate the potential
effect of a loss of key personnel or inability to hire for a key role.
This assessment covered not only the coming 12 month period
but also for the period to September 2025 in order to support the
Viability Statement given on page 105.
• Amendments to IAS 8 Accounting Policies, Changed in Accounting
Estimates and Errors: Definition of Accounting Estimates.
• Amendment to IAS12 – International Tax Reform – pillar two
model rules.
Work will continue in the new financial year to assess the
impact of the new standards and interpretations on the Group’s
Financial Statements.
136
4. Accounting policies
The principal accounting policies adopted in the preparation of the
financial statements are set out below. The policies have been
consistently applied to all of the years presented, unless
otherwise stated.
Consolidation
Subsidiaries are entities that are directly or indirectly controlled by
the Group. Control exists where the Group has the power to govern
the financial and operating policies of the entity so as to obtain
benefits from its activities. In assessing control, potential voting
rights that are currently exercisable or convertible are taken into
account.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of a business
combination is measured as the fair value of the assets given,
equity instruments issued, the fair value of contingent or deferred
consideration and liabilities incurred or assumed at the date of
exchange. Costs directly attributable to the business combination
are charged to the income statement. The excess of the costs of a
business combination over the fair value of the identifiable net
assets acquired is recorded as goodwill. If the cost of a business
combination is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the
income statement. Should the fair value of contingent or deferred
consideration vary from the actual value on settlement date, the
difference is recognised directly in the income statement.
operating segment performance. The chief operating decision
maker in determining a business or operating segment is the
Board of Directors.
Foreign currency translation
a. Functional and presentation currency
The consolidated financial statements are presented in Pounds
Sterling, which is the Group’s presentation currency. Items included
in the financial statements of each of the Group’s subsidiaries are
measured using the currency of the primary economic environment
in which the entity operates (the ‘functional currency‘).
b. Transactions and balances
Foreign currency transactions are translated into an entity’s
functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at balance sheet exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in
the income statement, except when deferred in equity as qualifying
cash flow hedges and qualifying net investment hedges.
c. Subsidiaries
The results and financial position of subsidiaries that have a
functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
Where deferred consideration is payable in cash, the amount is
discounted to present value at the date of acquisition, using the
Group’s weighted average cost of capital. The financing charge
which arises on the discounted consideration between the
acquisition date and the date of payment is included within finance
costs and treated as a non-underlying item.
• income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
Transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are
also eliminated but considered an impairment indicator of the
asset transferred. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies
adopted by the Group.
Subsidiary audit exemptions
Gooch & Housego (UK) Limited (05890426), Gooch & Housego
(Torquay) Limited (04381203), Spanoptic Limited (SC192283),
Kent Periscopes Limited (05417618), G&H US Holdings Limited
(06382710), G&H Property Holdings Limited (04649035),
Integrated Technologies Limited (01300238), Integrated
Technologies (Holdings) Limited (02635933), VITL Limited
(08473871), ORF Limited (01873862), Artemis Optical Limited
(00514290) and Artemis Optical (Holdings) Limited (06552780)
are exempt from the requirement to file audited financial
statements by virtue of Section 479A of the Companies Act 2006.
As part of this process, the Company has provided statutory
guarantees to these subsidiaries.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker,
who oversees the allocation of resources and the assessment of
• all resulting exchange differences are recognised in other
comprehensive income and as a separate component of equity.
On consolidation, exchange differences arising from the translation
of the net investment in foreign operations, and of borrowings and
other currency instruments designated as hedges of such
investments, are taken to shareholders’ equity. When a foreign
operation is partially disposed of or sold, exchange differences that
were recorded in equity are recognised in the income statement as
part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
No depreciation is charged on freehold land or capital work in
progress. Certain plant used in the manufacturing process which is
constructed from precious metals is not depreciated.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
137
Depreciation on other assets is calculated to allocate their cost
over their estimated useful lives, as follows:
resources made available, are capitalised. The expenditure
capitalised includes the cost of materials, direct labour and
an appropriate proportion of overheads.
• Freehold buildings
2-3%
Straight-line
• Leasehold property
over term of lease Straight-line
• Plant and machinery
6-20% Straight-line
• Fixtures, fittings and computers
6-33% Straight-line
• Motor vehicles
25% Reducing balance
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date. Where an
asset’s carrying amount is greater than its estimated recoverable
amount, the asset’s carrying amount is written down immediately
to its recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell or an asset’s value in use.
Intangible assets
a. Goodwill
Goodwill represents the excess of the cost of a business
combination over the fair value of the net identifiable assets of the
acquired business. Goodwill arising from business combinations is
included in ‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. The impairment testing requires an
estimation of the ‘value in use’ of the cash-generating unit (the CGU)
to which goodwill is allocated using appropriately discounted cash
flow projections. Any impairment is recognised immediately as an
expense to the income statement and is not subsequently reversed.
For the purpose of impairment testing a CGU is defined as either a
business segment or an operating entity, as appropriate. Further
information is given in note 18.
Capitalised development expenditure is stated at cost less
accumulated amortisation and impairment losses. Development
costs are amortised using the straight line method over their
estimated useful life lives, which is typically 5 years, and are
charged to Research and Development in the income statement.
c. Computer software
Costs associated with developing or maintaining computer
software programmes are recognised as an expense as incurred.
Costs that are directly associated with the development of
identifiable and unique software products controlled by the Group,
and that will probably generate economic benefits exceeding costs
beyond one year, are capitalised and recognised as intangible
assets. Costs include the software development employee costs
and an appropriate portion of relevant overheads.
Acquired computer software and licences are capitalised on
the basis of the costs incurred to acquire and bring to use the
specific software.
Capitalised software costs are amortised using the straight line
method over their estimated useful lives of up to 5 years and
charged to Administration in the income statement.
d. Acquired customer relationships, orderbooks and brands
Other acquired intangible assets are stated at fair value less
accumulated amortisation and impairment losses.
The useful life of each of these assets is assessed based on the
differing natures of each of the intangible assets acquired.
Amortisation is charged on a straight-line basis over the estimated
useful life of the assets acquired and charged to administration in
the Income Statement.
Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
• Customer relationships
up to 10 years
• Brand names
• Order books
up to 10 years
up to 2 years
Government grants
Government grants are accounted for on an accruals basis. Grants
are credited to the income statement over the life of the project.
Where grants are used to fund the acquisition of property, plant
and equipment, the grant is initially credited to deferred income
then credited to the income statement over the estimated
economic life of the asset.
b. Capitalised R&D, patents and licenses
Internally incurred costs associated with the filing and perfection
of patents and trademarks are capitalised and carried at cost less
accumulated amortisation. Amortisation is calculated using the
straight-line method to allocate the cost over their useful economic
lives of 5 – 10 years and are charged to Research and
Development in the income statement.
Patents, trademarks and licences have a finite useful life and are
carried at cost less accumulated amortisation. Amortisation is
calculated using the straight line method to allocate the cost over
their useful economic lives of 5 – 10 years.
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding,
is recognised as an expense as incurred.
Development costs incurred after the point at which the commercial
and technical feasibility of the product have been proven, and the
decision to complete the development has been taken and
138
Impairment of non-financial assets
The Group assesses at each balance sheet date whether an asset
may be impaired. If any such indicator exists, the Group tests for
impairment by estimating the recoverable amount which is the
higher of the value in use and the fair value less costs to sell. If the
recoverable amount is less than the carrying value of the asset,
the asset is impaired and the carrying value is reduced to its
recoverable amount. In addition to this, assets with indefinite lives
are tested for impairment annually. Non-financial assets other
than goodwill which have suffered an impairment are reviewed for
possible reversal of the impairment at each balance sheet date.
Inventories
Inventories are stated at the lower of weighted average cost and net
realisable value. The cost of finished goods and work in progress
comprises design costs, raw materials, direct labour, other direct
costs and related production overheads (based on normal operating
capacity). It excludes borrowing costs. Net realisable value is the
estimated selling price in the ordinary course of business, less
applicable variable selling expenses.
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment for expected
credit losses.
The group applies the IFRS9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets. To measure
the expected credit losses, trade receivables have been grouped
based on shared credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of sales
over a period of 24 months prior to the reporting date and the
corresponding historical credit losses experienced within this
period. The historical loss rates are adjusted to reflect current and
forward-looking information on macroeconomic factors affecting
the ability of the customers to settle the receivables.
Cash and cash equivalents
Cash and cash equivalents for the purpose of the cash flow
statement includes cash in hand and deposits held on call with
banks with original maturities of three months or less.
Trade payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective
interest method.
Borrowing costs which are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised as
part of the cost of that asset.
Borrowing costs are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Derivatives and hedging activities
The Group transacts derivative financial instruments to manage
the underlying exposure to foreign exchange risk. The Group does
not transact derivative financial instruments for trading purposes.
Financial instruments are initially recognised at fair value on the
date that a contract is entered into and are subsequently
remeasured at their fair value. The Group documents the
relationship between the hedging instrument and the hedged item
and, on a periodic basis, assesses whether the hedge is effective.
The hedges entered into during FY2023 have been assessed as
effective and therefore the Group has applied hedge accounting.
Accordingly, movements in the fair value of the hedges have been
recorded in reserves.
Current and deferred income tax
Income tax on the profit or loss for the year comprises current and
deferred tax.
Current tax is the expected tax payable on the taxable income for
the year using rates enacted at the balance sheet date, and any
adjustments to tax payable in respect of prior years.
Amounts claimed under the Research and Development Expenditure
Credit scheme have been recognised within other income.
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, the deferred income tax is not
accounted for, if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable
profit or loss.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries, except where the timing of the
reversal of the temporary difference is controlled by the Group
and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax is recognised in the income statement except
to the extent that it relates to items recognised directly in other
comprehensive income and equity, in which case it is recognised in
other comprehensive income and equity.
In the UK and US, the Group is entitled to a tax deduction for
amounts treated as compensation on exercise of certain employee
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
139
Gooch & Housego Employee Stock Purchase Plan are determined
by using the Monte Carlo option pricing model. The fair value of
options under the Gooch & Housego Save As You Earn Scheme are
determined by using the Black-Scholes option pricing model.
The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share
premium when the options are exercised.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events; it is probable
that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated.
The Group monitors and assesses its warranty provision
requirement on a continuing basis. The provision for other liabilities
and charges provides for the anticipated cost of repair and
rectification of products under warranty, based on historical repair
and replacement costs. In addition the Directors will also assess
expected changes in future costs based on current information.
Non underlying items
Transactions are classified as non-underlying where they relate
to an event that falls outside the ordinary activities of the business
and where individually or in aggregate they have a material impact
on the financial statements. These may include, but are not
restricted to: restructuring and site closure costs, costs related to
acquisitions, adjustments to the fair value of acquisition related
items such as contingent consideration, acquired intangible asset
amortisation or impairment and other items due to their
significance, size or nature, and the related taxation.
Leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the lessee’s incremental borrowing
rate is used, being the rate that the lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
share options under each jurisdiction’s tax rules. As explained
under “Share options” below, a compensation expense is recorded
in the Group’s income statement over the period from the grant
date to the vesting date of the relevant options. As there is a
temporary difference between the accounting and tax bases, a
deferred income tax asset is recorded. The deferred income tax
asset arising is calculated by comparing the estimated amount of
tax deduction to be obtained in the future (based on the Group’s
share price at the balance sheet date) with the cumulative amount
of the compensation recorded in the income statement. If the
amount of estimated future tax deduction exceeds the cumulative
amount of the remuneration expense at the statutory rate, the
excess is recorded directly in equity.
Employee benefits
a. Pension obligations
The Group operates money purchase pension schemes for UK
employees and Section 401(k) plans for US employees. For
employees in Continental Europe and Asia, we engage local payroll
agencies to ensure local regulations are complied with. The Group
pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The
Group has no further payment obligations once the contributions
have been paid. The contributions are recognised as an employee
benefit expense in the income statement when they are due.
Prepaid contributions are recognised as an asset to the extent that
a cash refund or a reduction in the future payments is available.
b. Profit share and bonus plans
The Group recognises a liability and an expense for bonuses and
profit-sharing, based on a formula that takes into consideration
the profit attributable to the Group’s shareholders after certain
adjustments. The Group recognises a provision where contractually
obliged or where there is a past practice that has created a
constructive obligation.
c. Share options
The Group operates a number of share option schemes which
are all accounted for as equity-settled schemes. In accordance
with IFRS 2 the fair value of the employee services received in
exchange for the grant of the options is recognised as an expense
in the income statement. The total amount to be expensed over
the vesting period is determined by reference to the fair value
of the options granted, excluding the impact of any non-market
vesting conditions (for example, profitability targets). Non-market
vesting conditions are included in assumptions about the number
of options that are expected to vest.
Employer’s National Insurance in the United Kingdom and
equivalent taxes in other jurisdictions are payable on the exercise
of certain share options. In accordance with IFRS 2, this is treated
as a cash-settled transaction. A provision is made, calculated using
the fair value of the Group’s shares at the balance sheet date,
pro-rated over the vesting period of the options.
At each balance sheet date, for awards with non-market vesting
conditions, the entity revises its estimates of the number of options
that are expected to vest. It recognises the impact of the revision
to original estimates, if any, in the income statement, with a
corresponding adjustment to equity. The fair value of the options
under the Gooch & Housego 2013 Long Term Incentive Plan and the
140
Lease payments included in the measurement of the lease
liability comprise:
• fixed lease payments (including in substance fixed payments),
less any lease incentives;
• variable lease payments that depend on an index or rate, initially
measured using the index or rate at the commencement date;
• the amount expected to be payable by the lessee under residual
value guarantees;
• the exercise price of purchase options, if the lessee is reasonably
certain to exercise the options; and
For short-term leases (leases with a term of 12 months or less)
and leases of low-value assets, the Group has opted to recognise
a lease expense on a straight-line basis as permitted by IFRS 16.
This expense is presented within operating expenses in the
Income Statement.
As a practical expedient, IFRS 16 permits a lessee not to separate
non-lease components, and instead account for any lease and
associated non-lease components as a single arrangement.
The Group has not used this practical expedient.
Share capital
Ordinary shares are classified as equity.
• payments of penalties for terminating the lease, if the lease term
reflects the exercise of an option to terminate the lease.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from
the proceeds.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability and by
reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
• the lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease
payments using a revised discount rate;
• the lease payments change due to changes in an index or rate or
a change in expected payment under a guaranteed residual value,
in which case the lease liability is remeasured by discounting the
revised lease payments using the initial discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used);
• a lease contract is modified, and the lease modification is not
accounted for as a separate lease, in which case the lease liability
is remeasured by discounting the revised lease payments using a
revised discount rate. The Group did not make any such
adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before
the commencement day less any lease incentives received and
any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset.
Variable rents that do not depend on an index or rate are not
included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an
expense in the period in which the event or condition that triggers
those payments occurs and are included in the line “Other
operating expenses” in the Income Statement.
Revenue recognition
The majority of the Group’s revenue is derived from the sale of
components and subsystems to customers. Revenue is recognised
at the transaction price that is expected to flow to the Group and
recognised at a point in time when the Group has transferred control
to the customer in line with the incoterms agreed with the customer.
Revenue is shown net of value-added tax, returns, rebates and
discounts and after eliminating sales within the Group.
Revenue is recognised to depict the transfer of control over
promised goods or services to customers in an amount that reflects
the amount of consideration specified in a contract with a customer,
to which the Group expects to be entitled in exchange for those
goods or services. Revenue represents sales, net of discounts, and
excluding value added tax and other sales related taxes. Performance
obligations are unbundled in each contractual arrangement if they
are distinct from one another. The contract price is allocated to the
distinct performance obligations based on the relative standalone
selling prices of the goods or services. The way in which the Group
satisfies its performance obligations varies by business and may be
on shipment, delivery, as services are rendered or on completion of
services depending on the nature of the product/service and terms
of the contract which govern how control passes to the customer.
Where the contract price is allocated to distinct performance
obligations, revenue is recognised at a point in time or, in cases
where there is a single performance obligation in relation to
several products and services, these are treated as long term
contracts, and revenue is recognised over time as appropriate.
A contract asset is recognised when the Group’s right to
consideration is conditional on something other than the passage
of time, for example the completion of future performance
obligations under the terms of the contract with the customer.
In some instances, the Group receives payments from customers
based on a billing schedule, as established in the contract, which
may not match the pattern of performance under the contract.
In this instance, a contract asset or contract liability is recognised
depending on the phasing of payment in relation to
the performance.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
141
Inventory provision
The Group continually monitors and assesses the provision for old
and slow moving inventory. Factors considered by the Directors
include the expected future usage and the potential obsolescence
and deterioration of the Inventory.
The provision for inventory obsolescence amounts to 20.2%
of the gross inventory value (2022: 17.3%). The Directors are
satisfied that this provision is appropriate. An increase in the
provision amounting to 2% of the gross inventory value would
increase the provision by £0.9m.
Further detail is given in note 19.
Accounting for acquisitions
An assessment of the fair value of the purchase consideration and
net assets acquired has been undertaken in respect of the
acquisitions of GS Optics and Artemis. Determining the fair value
of the consideration involves an estimate of the deferred
consideration payable, which is dependent on post-acquisition
performance, and therefore inherently uncertain. Intangible assets
relating to customer relationships, order books and brands have
been recognised based on estimates of the future cash flows to be
derived from those assets.
Further detail is given in note 32.
Critical accounting judgements
Non-underlying items
Transactions are classified as non-underlying where in the opinion
of the Directors they relate to an event that falls outside the
ordinary activities of the business and where individually or in
aggregate they have a material impact on the financial
statements. Details of our accounting policy in respect of
non-underlying items are given on page 139.
Interest income
Interest income is recognised on a time-proportion basis using the
effective interest method.
Dividend distribution
Dividend distributions to the Company’s shareholders are
recognised as a liability in the Group’s financial statements in the
period in which the dividends are approved by the Company’s
shareholders.
Earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to the owners of the Company, excluding
any costs of servicing equity other than ordinary shares;
• by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary
shares issued during the year and excluding treasury shares.
Diluted earnings per share adjusted the figures used in the
determination of basic earnings per share to consider:
• the after-income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares; and
• the weighted average number of additional ordinary shares that
would have been outstanding, assuming the conversion of all
dilutive potential ordinary shares.
5. Critical accounting estimates and judgments
The preparation of financial statements in accordance with
International Financial Reporting Standards (IFRS) requires the
Directors to make critical accounting estimates and judgments
that affect the amounts reported in the financial statements
and accompanying notes. These estimates and judgments are
continually evaluated and are based on historical experiences
and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The resulting
accounting estimates will on occasions fail to equal actual results.
The estimates and assumptions that have significant risk of
causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are outlined below.
Critical accounting estimates
Carrying value of goodwill
The Group tests goodwill for impairment at least annually. This
requires an estimation of the value in use of the cash generating
units (the CGUs) to which goodwill is allocated. The value in use
calculations are based on forecast cash flows of the CGU
discounted at the appropriate weighted average cost of capital.
These calculations have a number of significant variables including
forecast revenue and margins, working capital movements and
maintenance capital expenditure levels. The calculations are
also sensitive to the discount rate used. Further details are
given in note 18.
142
6. Segmental analysis
The Group’s segmental reporting reflects the information that
management uses within the business. The business is divided into
three market sectors, being Aerospace and Defence, Life Sciences/
Biophotonics and Industrial, together with the Corporate cost centre.
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, telecommunications and scientific research. Further
information can be found in our Operations Review on pages 48 to 58.
As can be seen below the amortisation of acquired intangible
assets has not been split by the three market sectors used for the
segmental reporting of the rest of the group income statement
as the information used by management and provided to the
Board (the Chief Operating Decision Maker) in respect of the
group balance sheet is set out by location. This is why the
Analysis of net assets on page 143 is provided by location
For year ended 30 September 2023
£’000
£’000
£’000
£’000
Aerospace and
Defence
Life Sciences /
Biophotonics
Industrial
Corporate
Revenue
Total revenue
Inter and intra-division
External revenue
Divisional expenses
EBITDA¹
EBITDA %
Depreciation and amortisation
Operating (loss)/profit before amortisation of
acquired intangible assets
Amortisation of acquired intangible assets
Operating (loss)/profit
Operating (loss)/profit margin %
Add back non-underlying items and amortisation of
acquired intangibles
Adjusted operating (loss)/profit
Adjusted (loss)/profit margin %
Finance costs
(Loss)/Profit before income tax expense
40,110
(1,554)
38,556
(38,889)
(333)
(0.9%)
(2,604)
(2,937)
–
(2,937)
(7.6%)
639
(2,298)
(6.0%)
(59)
(2,996)
34,928
(2,139)
32,789
(28,426)
4,363
13.3%
(1,205)
3,158
–
3,158
9.6%
946
4,104
12.5%
(65)
3,093
80,748
(3,617)
77,131
(64,224)
12,907
16.7%
(3,641)
9,266
–
9,266
12.0%
1,232
10,498
13.6%
(172)
9,094
–
–
–
929
929
–
(1,894)
(965)
(1,672)
(2,637)
–
1,677
(960)
–
(1,534)
(4,171)
Transactions between segments consist of the sale of products for resale.
The basis of accounting for these transactions is the same as for external revenue.
For year ended 30 September 2022
£’000
£’000
£’000
£’000
Aerospace and
Defence
Life Sciences /
Biophotonics
Industrial
Corporate
Revenue
Total revenue
Inter and intra-division
External revenue
Divisional expenses
EBITDA¹
EBITDA %
Depreciation and amortisation
Operating (loss)/profit before amortisation of
acquired intangible assets
Amortisation of acquired intangible assets
Operating (loss)/profit
Operating (loss)/profit margin %
Add back non-underlying items and amortisation of
acquired intangibles
Adjusted operating (loss)/profit
Adjusted (loss)/profit margin %
Finance costs
(Loss)/Profit before income tax expense
32,992
(2,439)
30,553
(31,220)
(667)
(2.2%)
(2,745)
(3,412)
–
(3,412)
(11.2%)
746
(2,666)
(8.7%)
(113)
(3,525)
33,190
(3,494)
29,696
(24,640)
5,056
17.0%
(1,378)
3,678
–
3,678
12.4%
273
3,951
13.3%
(56)
3,622
69,316
(4,763)
64,553
(53,437)
11,116
17.2%
(3,803)
7,313
–
7,313
11.3%
1,093
8,406
13.0%
(130)
7,183
–
–
–
107
107
–
(614)
(507)
(8,629)
(9,136)
–
8,309
(827)
–
(418)
(9,554)
¹EBITDA = Earnings before interest, tax, depreciation and amortisation
Management have added back the amortisation and impairment of acquired intangibles and goodwill, restructuring
costs, site closure costs and CEO succession costs in the above analysis. This has been shown because the Directors
consider the analysis to be more meaningful excluding the impact of these non-underlying expenses.
All of the amounts recorded are in respect of continuing operations.
Total
£’000
155,786
(7,310)
148,476
(130,610)
17,866
12.0%
(9,344)
8,522
(1,672)
6,850
4.6%
4,494
11,344
7.6%
(1,830)
5,020
Total
£’000
135,498
(10,696)
124,802
(109,190)
15,612
12.5%
(8,540)
7,072
(8,629)
(1,557)
(1.2%)
10,421
8,864
7.1%
(717)
(2,274)
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
143
6. Segmental analysis (continued)
Analysis of revenue by type:
For year ended 30 September 2023
Revenue from long term contracts
Revenue from sale of products
Total revenue
Industrial
Life Sciences
£’000
972
76,159
77,131
£’000
1,326
31,463
32,789
For year ended 30 September 2022
Industrial
Life Sciences
Revenue from long term contracts
Revenue from sale of products
Total revenue
£’000
5,316
59,237
64,553
£’000
582
29,114
29,696
Contract assets are disclosed in note 20 and contract liabilities are disclosed in note 22.
All of the contract liability balance at the beginning of the year was recognised as revenue
in the current year. There is no loss allowance held against contract assets (2022: nil).
The timing of receipts related to revenue from long term contracts is not materially different
to that recognised at point of sale.
As noted on page 142 the information used by management and provided to the Board (the
Chief Operating Decision Maker) in respect of the group balance sheet is set out by location.
This is why the analysis of net assets below is provided by location.
Analysis of net assets by location:
A&D
£’000
3,416
35,140
38,556
A&D
£’000
1,383
29,170
30,553
Total
£’000
5,714
142,762
148,476
Total
£’000
7,281
117,521
124,802
United Kingdom
USA
Continental Europe
Asia Pacific
2023
Assets
£’000
83,746
107,748
198
916
2023
Liabilities
£’000
(47,947)
(24,323)
(84)
(521)
192,608
(72,875)
2023
Net Assets
£’000
35,799
83,425
114
395
119,733
2022
Assets
£’000
72,870
101,574
488
1,156
176,088
2022
Liabilities
£’000
(33,909)
(23,472)
(52)
(114)
(57,547)
2022
Net Assets
£’000
38,961
78,102
436
1,042
118,541
For the year to 30 September 2023 non-current asset additions were £4.0m (2022: £5.5m) for
the UK and for the USA £6.6m (2022: £3.3m). There were no additions to non-current assets in
respect of Europe (2022: £nil) or the Asia Pacific region (2022: £nil). The value of non-current
assets in the USA was £66.2m (2022: £56.4m) and in the United Kingdom £45.5m (2022:
£41.5m). There were no non-current assets in Europe or the Asia-Pacific region.
Analysis of revenue by destination:
United Kingdom
North America
Continental Europe
Asia Pacific and Other
Total revenue
7. Expenses by nature
Raw materials and consumables
Changes in inventory
Employee costs
Other operating charges
Depreciation on property, plant and equipment
Depreciation on right of use assets
Amortisation of acquired intangible assets
Amortisation of other intangible assets
Impairment of goodwill and other intangible assets
Net losses/(gains) on foreign exchange
2023
£’000
27,309
59,328
34,769
27,070
148,476
2023
£’000
53,134
(2,690)
62,527
18,175
6,129
1,522
1,672
1,692
–
300
142,461
Note
9
18
2022
£’000
27,848
47,267
26,749
22,938
124,802
2022
£’000
45,520
3,996
54,368
6,506
5,839
1,263
1,903
1,438
6,726
(640)
126,919
144
8. Other income
Grants receivable
Amounts claimed under the RDEC
Other income
Other income relates to sales of certain materials used in production which need to be
reprocessed periodically.
9. Employee benefit expense
Wages and salaries
Social security costs
Share based payment charge
Medical and other insurance
Other pension costs
The monthly average number of employees during the year was:
Manufacturing
Sales, finance and administration
Key management compensation
Salaries and other short-term benefits
Compensation for loss of office
Share based payments
Other pension costs
2023
£’000
414
200
221
835
2022
£’000
363
197
–
560
2023
£’000
50,632
4,459
337
4,386
2,713
62,527
2023
Number
767
263
1,030
2023
£’000
4,124
–
337
199
4,660
2022
£’000
43,377
4,200
743
3,638
2,410
54,368
2022
Number
635
254
889
2022
£’000
4,936
366
743
267
6,312
Key management comprise the Executive Board and the management layer reporting
directly to the Executive Directors.
Directors’ remuneration, including the highest paid Director, has been included on
page 114 of the Remuneration Committee Report.
10. Auditors’ remuneration
PricewaterhouseCoopers LLP’s remuneration comprised:
Fees payable to the Group’s auditors for the audit of the parent company and consolidated financial statements
2023
£’000
355
2022
£’000
226
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
145
2023
£’000
11
11
(1,487)
(297)
(57)
(1,841)
2023
£’000
843
703
(1,130)
416
(349)
874
31
556
972
2023
£’000
5,020
1,104
73
6
31
14
(256)
–
972
2022
£’000
–
–
(469)
(248)
–
(717)
2022
£’000
399
(3)
(678)
(282)
(422)
313
127
18
(264)
2022
£’000
(2,274)
(432)
1,105
(32)
127
28
(365)
(695)
(264)
11. Finance income and costs
Finance income comprises:
- Bank interest
Finance costs comprise:
- Bank interest
- Lease interest
- Unwind of discount on deferred consideration
12. Income tax expense/(income)
Analysis of tax charge/(credit)in the year
Current taxation
UK Corporation tax
Overseas tax
Adjustments in respect of prior years
Total current tax
Deferred tax
Origination and reversal of temporary differences
Adjustments in respect of prior years
Change to UK tax rate
Total deferred tax
Income tax expense/(income) per income statement
The taxation (income)/expense for the year is lower (2022: higher) than the standard rate
of corporation tax in the UK. An explanation of the differences is detailed below:
Profit/(loss) before income tax expense
Profit/(loss) at the standard rate of tax of 22.0% for the year (2022: 19.0%)
Permanent differences
Adjustments in respect of foreign tax rates
Effect of UK rate change on deferred tax balances
Other timing differences
Adjustments in respect of prior years
Release of deferred tax liability in relation to goodwill
Total tax expense/(income)
There was no income tax relating to items included in other comprehensive income
(2022: nil).
Factors affecting the future tax charge
Overseas tax losses of £14.1m (2022: £11.1m) and UK tax losses of £1.7m (2022: nil) are
available against future profits of the Group. The utilisation of these losses is not sufficiently
certain to recognise a deferred tax asset.
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the
corporation tax rate would increase to 25% (rather than remaining at 19%, as previously
enacted). This new law was substantively enacted on 24 May 2021. Deferred taxes at the
balance sheet date have been measured using these enacted tax rates and reflected in
these financial statements.
2023
£’000
1,672
1,156
787
879
–
–
4,494
57
57
(747)
–
–
(747)
2022
£’000
1,903
–
1,179
–
6,726
613
10,421
–
–
(1,022)
127
(695)
(1,590)
146
13. Non-underlying items
Included within administration expenses
Amortisation of acquired intangible assets
Acquisitions costs
Restructuring costs
Site closure costs
Impairment of goodwill and acquired intangible assets
Other
Included within finance costs
Unwind of discount on deferred consideration
Included within taxation
Tax effect of the non-underlying items above
Restatement of UK deferred tax balances at 25%
Release of deferred tax on goodwill
Further detail in respect of the amortisation of acquired intangible assets is given in the
accounting policies and note 18.
Acquisition costs of £1.2m (2022: £nil) related to costs incurred associated with the
changes to the Group’s portfolio of business, most significantly the acquisitions of GS
Optics and Artemis.
Restructuring costs of £0.8m (2022:£1.2m) associated with the restructuring of the
Group’s operating model and the costs incurred to establish our contract manufacturing
partner’s capability to manufacture both acousto-optic and fibre optic products.
Site closure costs of £0.9m (2022: £nil). During the year the Group closed its small facility
in Shanghai and transferred its ITL business’ US operation from its site in Virginia into the
GS Optics campus in Rochester.
Restructuring costs incurred in the year ended 30 September 2022 related to the ongoing
streamlining of our manufacturing operations and outsourcing production of our commodity
AO products to a contract manufacturer in Thailand. The costs incurred in the period
largely comprised staff costs, severance costs, travel costs and asset write downs at the
sites being closed.
Other non-underlying items in the year ended 30 September 2022 relate to costs
associated with the chief executive officer succession and principally included payment
in lieu of notice and accelerated IFRS 2 costs.
The UK corporation tax rate increased to 25% with effect from 1 April 2023. During the
year ended 30 September 2022, a charge of £0.1m was incurred in relation to the tax rate
differential between current and deferred tax on timing differences arising in the year. The
effect in the year ended 30 September 2023 was £31,000, which has been included in the
underlying tax charge.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
147
14. Dividends
Final 2022 dividend: 7.7p per share (Final 2021 dividend paid in 2022: 7.7p)
2023 Interim dividend of 4.8p per share (2022: 4.7p per share)
The Directors have proposed a final dividend of 8.2p per share making the total dividend
paid and proposed in respect of the 2023 financial year 13.0p. (2022: 12.6p per share).
The total value of the proposed final dividend is £2,114,000 (2022: £1,978,000).
15. Earnings per share
The calculation of earnings per 20p Ordinary Share is based on the profit for the year
using as a divisor the weighted average number of Ordinary Shares in issue during the
year. The weighted average number of shares for the year ended 30 September 2023
is given below:
Number of shares used for basic earnings per share
Number of dilutive shares
Number of shares used for dilutive earnings per share
A reconciliation of the earnings used in the earnings per share calculation is set out below:
Basic earnings/(losses) per share
Amortisation of acquired intangible assets (net of tax)
Acquisition costs
Site closure costs
Impairment of goodwill and intangible assets (net of tax)
Restructuring costs (net of tax)
Other non-underlying items (net of tax)
Unwind of discount on deferred consideration
Release of deferred tax on goodwill
UK deferred tax rate change
Total adjustments net of income tax expense
Adjusted basic earnings per share
Basic diluted earnings/(losses) per share
Adjusted diluted earnings per share
£’000
4,048
1,345
1,073
729
–
599
–
58
–
–
3,804
7,852
4,048
7,852
2023
pence per share
16.1p
5.4p
4.1p
2.9p
–
2.6p
–
0.2p
–
–
15.2p
31.3p
16.0p
31.0p
Basic and diluted earnings / (losses) per share before amortisation and other adjustments
has been shown because, in the opinion of the Directors, it provides a useful measure of the
trading performance of the Group.
2023
£’000
1,978
1,202
3,180
2022
£’000
1,928
1,177
3,105
2023
2022
25,085,805
25,040,919
272,361
211,603
25,358,166
25,252,522
£’000
(2,010)
1,491
–
–
6,438
944
526
(695)
127
8,831
6,821
(2,010)
6,821
2022
pence per share
(8.0p)
6.0p
–
–
25.7p
3.8p
2.0p
(2.8p)
0.5p
35.2p
27.2p
(8.0p)
27.0p
148
16. Property, plant and equipment
Capital work in
progress
Freehold land
and buildings
£’000
£’000
Leasehold
property
£’000
Plant and
machinery
£’000
Cost or valuation
At 1 October 2021
Additions
Disposals
Reclassification
Exchange rate differences
At 30 September 2022
Acquisitions
Additions
Disposals
Reclassification
Exchange rate differences
At 30 September 2023
Accumulated depreciation
At 1 October 2021
Charge for the year
Disposals
Reclassification
Exchange rate differences
At 30 September 2022
Charge for the year
Disposals
Reclassification
Exchange rate differences
At 30 September 2023
Net book value
At 30 September 2021
At 30 September 2022
At 30 September 2023
1,109
4,050
–
(2,389)
205
2,975
40
2,715
–
(2,326)
(102)
3,302
–
–
–
–
–
–
–
–
–
–
–
1,109
2,975
3,302
9,236
18,708
–
–
112
165
9,513
–
434
(1,528)
–
(8)
8,411
2,400
408
–
112
162
3,082
263
(921)
–
(8)
2,416
6,836
6,431
5,995
411
(24)
913
3,274
23,282
26
180
(119)
54
(1,642)
21,781
6,432
1,282
(22)
73
1,317
9,082
1,389
(118)
6
(666)
9,693
12,276
14,200
12,088
44,190
1,444
(227)
822
3,825
50,054
1,867
2,337
(5,911)
1,984
(1,779)
48,552
27,507
3,606
(173)
(528)
2,333
32,745
3,929
(5,754)
(6)
(1,212)
29,702
16,683
17,309
18,850
No interest was capitalised in the year (2022: £Nil).
Fixtures, fittings
and computers
£’000
4,086
764
(59)
542
299
5,632
147
541
(545)
78
(144)
5,709
3,087
532
(44)
343
216
4,134
537
(422)
–
(102)
4,147
999
1,498
1,562
Motor
vehicles
£’000
83
–
–
–
19
102
–
–
(2)
–
(4)
96
41
11
–
–
16
68
11
(2)
–
(2)
75
42
34
21
Total
£’000
77,412
6,669
(310)
–
7,787
91,558
2,080
6,207
(8,105)
(210)
(3,679)
87,851
39,467
5,839
(239)
–
4,044
49,111
6,129
(7,217)
–
(1,990)
46,033
37,945
42,447
41,818
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
149
17. Right of use assets
Cost
At 1 October 2021
Additions
Disposals
Exchange rate differences
At 30 September 2022
Acquisitions
Additions
Exchange rate differences
At 30 September 2023
Accumulated depreciation
At 1 October 2021
Charge for the year
Disposals
Exchange rate differences
At 30 September 2022
Charge for the year
Exchange rate differences
At 30 September 2023
Net book value
At 30 September 2021
At 30 September 2022
At 30 September 2023
18. Intangible assets
Cost
At 1 October 2021
Additions
Disposals
Exchange rate differences
At 30 September 2022
Acquisitions
Additions
Disposals
Reclassifications
Exchange rate differences
At 30 September 2023
Accumulated amortisation and impairment
At 1 October 2021
Charge for the year
Impairment charge
Disposals
Exchange rate differences
At 30 September 2022
Charge for the year
Disposals
Reclassifications
Exchange rate differences
At 30 September 2023
Net book value
At 30 September 2021
At 30 September 2022
At 30 September 2023
Fixtures and
fittings
£’000
Motor
vehicles
£’000
Land and
buildings
£’000
Plant and
machinery
£’000
32
14
(9)
6
43
42
25
(3)
107
19
10
(9)
2
22
12
(2)
32
13
21
75
45
–
–
–
45
–
13
–
58
36
7
–
–
43
3
–
46
9
2
12
8,403
188
(987)
1,559
9,163
2,656
3,237
(586)
14,470
3,218
1,224
(987)
671
4,126
1,492
(326)
5,292
5,185
5,037
9,178
77
–
–
16
93
679
–
(8)
764
54
22
–
14
90
15
(8)
97
23
3
667
Total
£’000
8,557
202
(996)
1,581
9,344
3,377
3,275
(597)
15,399
3,327
1,263
(996)
687
4,281
1,522
(336)
5,467
5,230
5,063
9,932
Goodwill
Acquired
customer
relationships
and order books
Acquired
brands
Capitalised
R&D, patents
and licences
Computer
software
Total
£’000
£’000
£’000
£’000
£’000
£’000
52,316
–
–
7,012
59,328
11,354
–
–
–
(2,775)
67,907
15,598
–
5,574
–
2,540
23,712
–
–
–
(860)
22,852
36,718
35,616
45,055
30,202
–
(12,364)
2,182
20,020
3,259
–
–
–
(1,037)
22,242
22,486
1,500
586
(12,364)
1,521
13,729
1,400
–
–
(774)
14,355
7,716
6,291
7,887
4,128
–
–
292
4,420
1,410
–
–
–
(106)
5,724
1,824
403
566
–
154
2,947
272
–
–
(77)
3,142
2,304
1,473
2,582
5,289
785
(414)
22
5,682
–
605
–
202
(13)
4,164
1,114
(118)
38
5,198
–
524
(64)
8
(127)
6,476
5,539
3,140
791
–
(414)
(3)
3,514
898
–
–
(9)
2,216
647
–
(118)
62
2,807
794
(64)
8
(138)
4,403
3,407
2,149
2,168
2,073
1,948
2,391
2,132
96,099
1,899
(12,896)
9,546
94,648
16,023
1,129
(64)
210
(4,058)
107,888
45,264
3,341
6,726
(12,896)
4,274
46,709
3,364
(64)
8
(1,858)
48,159
50,835
47,939
59,729
150
18. Intangible assets (continued)
In the year ended 30 September 2022, the Group recorded an impairment charge of £6.7m
on the carrying value of its goodwill and other acquired intangible assets held in respect of
its UK sites CGU. This was as a consequence of an increase in the Group’s weighted average
cost of capital which has been driven higher by increased costs of borrowing in the market
as well as the weaker financial performance of that CGU in the financial year. The CGUs
reflect our operating model, being regionally based.
Goodwill is allocated to the operating regions as follows: US £29.9m and UK £5m.
The goodwill relating to the Ashford site, which continues to constitute a separate
CGU is £10.2m. The CGUs reflect our operating model, being regionally based.
The provisional goodwill attributable to the UK cash generating unit arose on the acquisition
of Artemis Optical Holdings Limited during the year. Further details are given in note 32.
Due to the short period of time that has elapsed since the acquisition, the Directors have
not considered it necessary to undertake a detailed impairment review in respect of this
goodwill. The Directors have reviewed the post acquisition performance of the business
and are satisfied that the future prospects of the acquired business support the carrying
value of goodwill. The UK CGU is not therefore included in the sensitivity disclosures
included below.
The goodwill which arose on the acquisition of GS Optics has been included in the US CGU.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment
losses. The impairment testing requires an estimation of the recoverable amount of the
CGU, being the higher of the cash-generating unit’s fair value less costs of disposal and its
value in use. The value in use calculations use cash flow projections based on the latest
budget and three year strategic plan projections approved by the Board. The near term
strategic plan is supported by detailed customer and product analysis. In the medium term
forecast sales growth rates are based on past experience adjusted for the strategic
direction and near-term investment priorities within each CGU. The key assumptions
include growth rates in the key markets and customer demand for product lines validated
by reference to third party market growth projections. Cash flow forecasts are determined
based on historic experience of operating margins, adjusted for the impact of changes in
product mix and delivered cost-saving initiatives. The projections do not include the
benefits of any future planned restructuring or product outsourcing activity.
The following key assumptions were made:
Cash Generating Unit
Average annual growth
in revenue from
FY2023 to FY2026
Average annual growth
in revenue from
FY2026 to FY2038
Growth into
perpetuity
Average operating
margin to FY2038
Pre Tax
Discount Rate
US
Ashford (ITL)
3.8%
17.6%
3.0%
3.0%
2.0%
2.0%
17.6%
17.4%
15.8%
16.4%
The headroom on the value in use calculations is summarised for each of the cash
generating units below:
Cash Generating Unit
US
Ashford (ITL)
Headroom
£50.2m
£7.0m
Management have performed various sensitivities on the value in use calculations which
underpin the goodwill valuations. These include increases to the discount rates and
reductions to the planned growth rates, the effects of which are summarised below:
Cash Generating
Unit
Effect on value in use
of an increase of 1%
in the discount rate
Effect of a 1% reduction in
growth per annum from
FY2023 to FY2026
Effect of a 1% reduction in
growth per annum from
FY2026 to FY2038
Effect of a 1% reduction
in growth to perpetuity
Effect of a 1% reduction
in operating margin
from FY2024 – FY2026
US
Ashford (ITL)
(£12.2m)
(£2.9m)
(£0.8m)
(£0.2m)
(£5.9m)
(£2.2m)
(£3.4m)
(£0.8m)
(£2.2m)
(£0.6m)
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
151
19. Inventories
Raw materials
Work in progress
Finished goods
The cost of inventories recognised as an expense and included in cost of revenue
amounted to £54.2m (2022: £49.5m).
At 1 October
Acquired
Increase/(decrease) in provision
Exchange rate movement
At 30 September
The Group’s banking facilities are secured on certain of its assets including inventory.
20. Trade and other receivables
Trade receivables
Other receivables
Contract assets
Prepayments
The carrying amount of the Group’s trade and other receivables is denominated in the
following currencies:
Pound Sterling
US Dollar
Euro
Other
The ageing of trade receivables and contract assets by due date is as follows:
Current
1 to 3 months
Over 3 months
Less provision for impairment
Net trade receivables and contract assets
None of the trade receivables are with customers where we have had any
history of default.
At 1 October
Acquired
Release of provision
Increase in provision
Exchange rate movement
At 30 September
The provision for expected credit loss amounts to 0.5% of current balances, 2% of
balances in the 1 – 3 month category, and 10% of balances greater than 3 months old.
2023
£’000
15,887
16,936
4,759
37,582
2023
£’000
7,744
452
1,518
(226)
9,488
2023
£’000
27,804
1,557
3,168
1,546
34,075
2023
£’000
9,926
22,711
1,438
–
34,075
2023
£’000
21,170
8,078
2,226
31,474
(502)
30,972
2023
£’000
554
25
(199)
140
(18)
502
2022
£’000
16,231
17,517
3,325
37,073
2022
£’000
7,298
–
(31)
477
7,744
2022
£’000
31,608
1,220
1,708
1,062
35,598
2022
£’000
8,204
25,968
1,104
322
35,598
2022
£’000
23,417
8,910
1,543
33,870
(554)
33,316
2022
£’000
463
–
(131)
184
38
554
152
21. Cash and cash equivalents
Cash at bank and on hand
22. Trade and other payables
Trade payables
Contract liabilities
Other taxation and social security
Derivative financial instruments
Accruals
23. Borrowings and lease liabilities
Current:
Bank borrowings
Leases
Non-current:
Bank borrowings
Leases
2023
£’000
7,294
2023
£’000
5,889
764
905
–
13,598
21,156
2023
£’000
10
1,443
1,453
28,157
9,394
37,551
2022
£’000
5,999
2022
£’000
7,698
1,063
1,017
1,272
11,715
22,765
2022
£’000
64
1,732
1,796
18,730
4,539
23,269
Total borrowings and lease liabilities
39,004
25,065
The carrying values of the bank borrowings and leases are not materially different from
their fair values and are included as part of the fair value disclosure for all financial
instruments in note 29.
G&H’s primary lending bank is NatWest Bank. The Group’s facilities comprise a $60m
(£49.2m) dollar revolving credit facility and a $10m (£8.2m) flexible acquisition facility.
At 30 September 2023, the balance drawn on the revolving credit facility was $34.6m
(£28.3m) (2022: $21.3m (£19.1m)) and on the flexible acquisition facility nil (2022: nil).
The facilities above are committed until 31 March 2027 and attract an interest rate of
between 1.6% (at leverage of less than or equal to 1:1) and 2.1% (at leverage of more than
2:1) above the US Dollar SOFR rate specified by the bank dependent upon the Group’s
leverage ratio, payable on rollover dates.
The Group’s banking facilities are secured on certain of its assets including land and
buildings, property plant and equipment and inventory.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
153
23. Borrowings and lease liabilities (continued)
Maturity profile of bank borrowings
Within one year
Between one and five years
Maturity profile of lease liabilities
Within one year
Between two and five years
After five years
Details of lease interest charges and right of use assets are given in notes 11
and 17 respectively.
The total cash outflow in respect of leases in the year ended 30 September 2023
was £1.9m (2022: £1.8m)
24. Provisions for other liabilities and charges
The movements in the Group provision for other liabilities and charges during the year
are as follows:
At 1 October
Utilised during year
Increase in year
Exchange movements
At 30 September
The Group provision for other liabilities and charges includes amounts provided for the
anticipated cost of repair and rectification of products under warranty, based on known
exposures and historical occurrences. The Group offers warranty periods ranging up to
10 years on some of its products.
2023
£’000
10
28,103
28,113
2023
£’000
2,009
8,481
3,528
14,018
2022
£’000
64
18,730
18,794
2022
£’000
1,944
3,500
1,555
6,999
2023
£’000
848
(282)
1,027
(11)
1,582
2022
£’000
1,447
(832)
207
26
848
2022
£’000
(5,699)
(18)
–
(605)
(6,322)
2022
£’000
225
352
1,392
1,969
(6,203)
(2,088)
–
(8,291)
(6,322)
Total
£’000
(5,699)
(18)
(605)
(6,322)
(556)
(912)
286
154
25. Deferred tax assets and liabilities
The movements in the Group’s deferred tax assets and liabilities during the year are as follows:
At 1 October
Charged to the income statement
On acquisitions
Exchange movements
Net liability at 30 September
The current portion of the deferred tax liability is £1.6m (2022: £0.3m)
The deferred tax provided for in the financial statements is disclosed under the following
balance sheet headings and can be analysed as follows:
Deferred income tax assets
Intangible assets
IFRS16 Leases
Provisions
Deferred income tax liabilities
Property, plant and equipment
Intangible assets
Other timing differences
Deferred tax balance at 30 September
The movement on the deferred tax balances by category is shown below:
2023
£’000
(6,322)
(556)
(912)
286
(7,504)
2023
£’000
100
319
1,759
2,178
(6,338)
(2,837)
(507)
(9,682)
(7,504)
Provisions
Property, plant
and equipment
Intangible
assets
Other timing
differences
At 1 October 2021
(Charged)/credited to income statement
Exchange movements
At 30 September 2022
(Charged)/credited to income statement
On acquisitions
Exchange movements
At 30 September 2023
Intangible
assets
£’000
IFRS16
leases
£’000
281
(98)
42
225
(129)
–
4
100
392
(107)
67
352
(17)
14
(30)
319
£’000
1,210
(2)
184
1,392
442
(12)
(63)
1,759
£’000
(4,999)
(488)
(716)
(6,203)
(239)
(250)
354
£’000
(2,583)
677
(182)
(2,088)
(106)
(664)
21
£’000
–
–
–
–
(507)
–
–
(6,338)
(2,837)
(507)
(7,504)
Overseas tax losses of £14.1m (2022: £11.1m) and UK tax losses of £1.7m (2022: £nil) are
available to offset against future profits of the Group. The Group has not recognised a deferred
income tax asset of £4.0m (2022: £2.3m) in respect of these losses due to uncertainty as to
whether they will be utilised within the foreseeable future.
No deferred tax has been provided in relation to unremitted earnings from overseas subsidiaries
on the basis that no incremental tax charge is currently anticipated to arise upon remittance of
these earnings to the UK.
26. Called up share capital
Issued and fully paid ordinary shares of 20p each
At 1 October
Shares issued and fully paid
At 30 September
2023
Number
2022
Number
25,040,919
25,040,919
745,478
–
25,786,397
25,040,919
2023
£’000
5,008
151
5,159
2022
£’000
5,008
–
5,008
11,275 shares were allotted under share option schemes during the year ended 30 September
2023 (2022: nil). The remaining 734,203 shares issued in the year were issued as part
consideration for the acquisitions of GS Optics and Artemis Optical Holdings Limited.
The company does not have a limited amount of authorised capital.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
155
27. Reserves
At 1 October 2021
Loss for the financial year
Dividends paid
Fair value of share options
Currency hedge fair value
Currency translation differences
At 30 September 2022
At 1 October 2022
Profit for the financial year
Premium on shares issued
Dividends paid
Fair value of share options
Currency hedge fair value
Currency translation differences
At 30 September 2023
Share premium
account
£’000
16,000
–
–
–
–
–
16,000
16,000
–
51
–
–
–
–
Merger
reserve
£’000
7,262
–
–
–
–
–
7,262
7,262
–
4,299
–
–
–
–
16,051
11,561
Cumulative
translation reserve
£’000
6,054
–
–
–
–
9,774
15,828
15,828
–
–
–
–
–
(5,801)
10,027
Hedging
reserve
£’000
(135)
–
–
–
(1,137)
–
(1,272)
(1,272)
–
–
–
–
1,287
–
15
Retained
earnings
£’000
80,087
(2,010)
(3,105)
743
–
–
75,715
75,715
4,048
–
(3,180)
337
–
–
76,920
28. Share options
The Group operates the Gooch & Housego 2013 Long Term Incentive Plan (the 2013 LTIP),
the Gooch & Housego Save As You Earn Scheme, the Gooch & Housego ESPP scheme and
the Gooch & Housego PLC Restricted Stock Units Plan.
A reconciliation of total share option movements across these schemes is shown below:
2023
2022
Outstanding at 1 October
Awarded
Exercised
Adjustment
Lapsed
Outstanding at 30 September
Exercisable at 30 September
Number
457,515
409,782
(11,275)
2,323
(190,283)
668,062
–
Weighted average
exercise price (£)
0.84
–
(4.64)
4.64
(0.36)
0.33
–
Number
392,276
167,929
–
–
(102,690)
457,515
–
Weighted average
exercise price (£)
1.18
–
–
–
(0.76)
0.84
–
The adjustment shown above relates to the ESPP scheme. Under this scheme, the
exercise price of options was not set until the scheme matured. It was not therefore
possible to quantify the exact number of options until the scheme matured.
The weighted average remaining contractual life of the options outstanding at 30
September 2023 was 2.7 years (2022: 1.8 years).
The total charge for the year relating to share options was £337,000 (2022: £743,000),
all of which related to equity-settled share based payment transactions.
156
28. Share options (continued)
The Gooch & Housego 2013 Long Term Incentive Plan
The Gooch & Housego 2013 Long Term Incentive Plan was adopted on 9 April 2013. Under
the plan, awards are made annually to key employees based on a percentage of salary.
Subject to the satisfaction of the required Total Shareholder Return performance criteria
and Earnings Per Share financial performance, these grants will vest upon publication of
the results of the Group three years after the grant date.
There have been ten grants of options under the 2013 Long Term Incentive Plan, which
will expire in 2023. The remuneration report provides further details on the share options
awarded and exercised during the financial year.
The 2013 Long Term Incentive Plan Awards were valued using the Monte Carlo option
pricing model. The expected volatility used in the model was based on the historical
volatility of the Company’s share price over the three years prior to the grant date.
The details of awards extant as at 30 September 2023 are summarised below:
No. of options granted
Expected volatility
Risk free rate
Option term
Fair value (£)
Exercise price
Expected dividend yield
Share price at grant date
9 Jan 2023
409,782
44%
2.00%
3 years
1,537,338
nil
2.1%
530p
Grant date
13 Jan 2022
142,380
46%
0.76%
3 years
1,119,282
nil
1%
1175p
A reconciliation of LTIP option movements is shown below:
Outstanding at 1 October
Awarded
Exercised
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
398,317
409,782
–
(184,449)
623,650
–
Weighted average
exercise price (£)
–
–
–
–
–
–
Number
351,868
142,380
–
(95,931)
398,317
–
The weighted average fair value of options granted in the year was 375.0p per option
(2022: 550.0p per option).
The weighted average remaining contractual life of LTIP options outstanding at 30
September 2023 was 2.8 years (2022: 1.9 years).
The total share-based payments charge for the year ended 30 September 2023 relating
to the 2013 LTIP scheme was £197,000 (2022: £669,000).
7 Jan 2021
174,781
46%
0.76%
2-3 years
1,751,334
nil
1%
1198p
Weighted average
exercise price (£)
–
–
–
–
–
–
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
157
28. Share options (continued)
The Gooch & Housego PLC Save As You Earn Scheme
The Gooch & Housego PLC Save As You Earn Scheme was established in February 2021
and is open to all UK employees. Under the scheme, employees choose to save a fixed
monthly amount from their net pay of between £5 and £100. At the start of the savings
period, participants are awarded options at a discount of 10% to the market value at that
date. At the end of the three-year savings period, participants can either withdraw their
savings or exercise their options to acquire shares at the option price. 31,749 options were
granted under this scheme on 26 March 2021.
Outstanding at 1 October
Awarded
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
24,697
–
(5,835)
18,862
–
Weighted average
exercise price (£)
11.59
–
11.59
11.59
–
Number
31,284
–
(6,587)
24,697
–
Weighted average
exercise price (£)
11.59
–
11.59
11.59
–
There were no options granted under the Save As You Earn Scheme in the year ended 30
September 2023 or 30 September 2022.
Share options outstanding at the end of the year expire one year after their respective
vesting dates and have the following exercise prices:
G&H PLC Save As You Earn Scheme
£11.59
Exercise price per share option
The weighted average remaining contractual life of SAYE options outstanding at
30 September 2023 was 0.5 years (2022: 1.5 years).
The total share-based payments charge for the year ended 30 September 2023
relating to the SAYE scheme was £18,000 (2022: £20,000).
Number of share options
2023
18,862
2022
24,697
158
28. Share options (continued)
The Gooch & Housego PLC Employee Stock Purchase Plan
The Gooch & Housego PLC Employee Stock Purchase Plan was established in February
2021 and is open to all US employees. Under the Plan, participants save a fixed monthly
amount of between $5 and $135 over the two-year savings period. At maturity of the
savings period, employees are able to withdraw their savings, or exercise their options at
a price equal to the lower of a 10% discount to the market price at the start of the savings
plan and a 10% discount to the market price at the end of the savings plan.
The initial award under the Employee Stock Purchase Plan matured on 1 May 2023 and
there are no outstanding options as at 30 September 2023. The option price was set at a
10% discount to the closing share price on 30 April 2023.
Outstanding at 1 October
Awarded
Adjustment
Exercised
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
8,952
–
2,323
(11,275)
–
–
–
Weighted average
exercise price (£)
11.14
–
4.64
4.64
–
–
–
Number
9,124
–
–
–
(172)
8,952
–
Weighted average
exercise price (£)
11.14
–
–
–
11.14
11.14
–
There were no options granted under the Employee Stock Purchase Plan during the year
ended 30 September 2023 or 30 September 2022.
Share options outstanding at the end of the year expire one year after their respective
vesting dates and have the following exercise prices:
Employee Stock Purchase Plan
Exercise price per share option
£4.64
2023
0
2022
8,952
Number of share options
The weighted average remaining contractual life of Employee Stock Purchase Plan
options outstanding at 30 September 2022 was 0.5 years.
The total share-based payments charge for the year ended 30 September 2023 relating
to the Employee Stock Purchase Plan was £24,000 (2022: £9,000).
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
159
28. Share options (continued)
Gooch & Housego PLC Restricted Stock Units (RSUs)
An award of restricted stock units was made to a senior US based employee in the year
ended 30 September 2022. A total of 25,549 units were awarded on 30 May 2022, with a
vesting commencement date of 14 April 2022. There are no performance criteria attached
to these RSUs, one third of which will vest on 14 April 2024 and the remaining two thirds will
vest on 14 April 2025 provided the beneficiary is still employed by G&H on those dates.
Outstanding at 1 October
Awarded
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
25,549
–
–
25,549
–
Weighted average
exercise price (£)
–
–
–
–
–
Number
–
25,549
–
25,549
–
Weighted average
exercise price (£)
–
–
–
–
–
The weighted average fair value of options granted in the year ended 30 September 2022
was 990p per option.
Share options outstanding at the end of the year expire one year after their respective
vesting dates and have the following exercise prices:
Employee Stock Purchase Plan
Exercise price per share option
–
2023
25,549
2022
25,549
Number of share options
The weighted average remaining contractual life of Restricted Stock Units outstanding
at 30 September 2023 was 1.3 years (2022: 2.2 years).
The total share-based payments charge for the year ended 30 September 2023 relating
to the Restricted Stock Units Plan was £98,000 (2022: £45,000).
29. Financial instruments
The Group’s financial instruments comprise bank borrowings, cash at bank, leases and
various items such as trade receivables and trade payables that directly arise from its
operations. The main risks arising from the Group’s financial instruments are interest
rate risk, liquidity risk and foreign currency risk.
Operations are financed through a mixture of retained profits, cash reserves, bank
borrowings and leases. Other than leases the Board’s policy is to use variable rate
borrowings whenever possible.
The currency profile for the Group’s financial assets and liabilities are set out below.
Pound Sterling
US Dollars
Euro
Yen
Financial assets
Financial liabilities
2023
£’000
3,680
3,171
387
71
7,309
2022
£’000
1,914
3,038
898
149
5,999
2023
£’000
1,220
37,784
–
–
2022
£’000
1,500
24,837
–
–
39,004
26,337
The financial assets listed in the above table are subject to floating rates of interest. The
interest rates on the financial liabilities are provided in Note 23. The financial assets include
cash at bank and derivative financial instruments but exclude short-term receivables,
prepayments and other receivables. The financial liabilities include bank borrowings, lease
liabilities and derivative financial instruments. Other short-term payables are excluded
from this disclosure.
Cash and bank borrowings are stated at amortised cost. Derivative financial instruments,
being currency contracts, are valued at level 2 fair values based on the present value of
future cash flows based on the forward exchange rates at the balance sheet date. Lease
liabilities are held at fair value based on discounted cash flows using a current borrowing rate.
160
29. Financial instruments (continued)
Capital risk management
Management considers capital as equity, as shown in the Group
balance sheet, excluding net debt.
Financial risks
The Group’s activities expose it to a variety of financial risks:
market risk (including foreign exchange risk and cash flow interest
rate risk), credit risk and liquidity risk.
The Group’s objectives when managing capital are to safeguard
the Group’s ability
• to continue as a going concern;
• to provide returns for shareholders and benefits for other
stakeholders; and
• to maintain an optimal capital structure to reduce the cost
of capital.
The Board is satisfied that these objectives have been met during
the year. Actions taken during the year to achieve these objectives
are outlined in the Chief Executive Officer’s Review.
In order to maintain or adjust the capital structure, the Group may
• adjust the amount of dividends paid to shareholders;
• return capital to shareholders;
• issue new shares;
• sell assets to reduce debt; and
• vary the level of debt financing.
The Group’s overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group’s financial performance. Where
considered appropriate, the Group will use derivative financial
instruments to hedge risk exposures. During the year ended 30
September 2023, the Group has entered into contracts to sell US
Dollars and buy UK Sterling at fixed rates at specific dates in the
future. At 30 September 2023, the Group had contracts to sell
$10.0m in the period to 30 September 2024. The fair value of these
contracts, an asset of £15,000, has been included within receivables
on the balance sheet (2022: contracts to sell $11.0m in the period
to 30 September 2022 with a fair value of negative £1.3m).
i. Market risk
a. Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the US Dollar.
Foreign exchange risk arises from
• future commercial transactions;
• recognised assets and liabilities; and
• net investments in foreign operations.
While the Group’s debt to equity ratio is consistently monitored,
changes in the Group’s need for capital and the selection of the
source and funding of capital are assessed against a number
of criteria which may have a direct effect on the Group debt to
equity ratio.
During the year the Group has entered into contracts to hedge
foreign exchange risk as disclosed above.
The Group has certain investments in foreign operations, whose
net assets are exposed to foreign currency translation risk.
The Group’s capital needs include, but are not solely limited to, its
• investment in non-current assets;
Currency exposure arising from the net assets of the Group’s
foreign operations is managed primarily through borrowings
denominated in the relevant foreign currencies.
• investment in working capital; and
• acquisition of businesses, technologies and other intangible assets.
The criteria against which the Group’s capital needs are assessed
include, but are not limited to,
• availability of and cost of debt financing;
• ability to raise equity financing at an acceptable share price; and
• ratio of debt to equity.
As a significant amount of the Group’s profit is earned by its US
subsidiaries, the Group’s profit is sensitive to movements in the
US Dollar exchange rate. If the average US Dollar exchange rate for
the year had been consistent with the closing exchange rate at 30
September 2022, with all other variables constant, post tax profits
for the year would have been £221,000 higher (2022: £534,000
lower) as a result of the translation in US Dollars.
Equity is more sensitive to movement in the US Dollar exchange rate
as a significant amount of the Group’s net assets are held in the
Group’s US subsidiaries. If the US Dollar weakened by 10% against
Pound Sterling with all other variables held constant, the net assets
of the Group would be £3,369,000 lower (2022: £4,033,000 lower).
If the US Dollar strengthened by 10% against Pound Sterling with
all other variables held constant, the net assets of the Group would
be £3,706,000 higher (2022: £4,929,000 higher).
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
161
b. Cash flow interest rate risk
The Group has cash balances of £7.3m, a proportion of which are
held in interest bearing current accounts. The Group’s income and
operating cash flows are substantially independent of changes in
market interest rates.
The Group is exposed to concentration of credit risk. The Group’s
top ten customers in 2023 accounted for 31% of the Group’s
revenue (2022: 29%). No individual customer made up more than
6% of revenue in either the current or prior year.
The Group’s interest rate risk arises from its revolving credit
facility. A 1% increase in the cost of the Group’s bank borrowings
would have resulted in an annualised increase in interest expense
of £225,000 (2022: £147,000).
b. Cash
Cash is held in current and deposit accounts with financial
institutions which have credit ratings of A- or greater.
The Group’s trade receivables are analysed in note 20.
Borrowings issued at variable interest rates expose the Group to
cash flow interest rate risk. During 2022 and 2023, the Group’s
borrowings at variable interest rates were denominated in Pound
Sterling and US Dollars as detailed in Note 23.
iii. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group aims to achieve a
balance between certainty of funding and a flexible, cost effective
borrowing structure.
ii. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. It arises principally from the Group’s trade receivables.
a. Trade and other receivables
The management of credit risk exposure is the responsibility of
each business unit which has credit policies in place to mitigate
the risk. The credit policies seek to verify a customer’s credit
worthiness prior to trading and maintain the level of trading within
agreed credit limits. Changes to credit limits require authorisation
in accordance with internal control policies.
30. Commitments
Capital commitments – authorised and contracted but not provided for
All capital commitments relate to property, plant and equipment.
The Group’s facilities comprise a committed revolving credit
facility of $60m (£49.2m) of which $34.6m (£28.3m) is drawn and
an uncommitted flexible acquisition facility of $10m (£8.2m) which
is undrawn. Both are available until 31 March 2027. These are
analysed in Note 23.
The Group aims to ensure that there are sufficient funds or credit
lines available to supplement cash flows generated from trading to
meet known obligations in the next 12 months
2023
£’000
867
2022
£’000
2,451
31. Related party transactions
No contracts or arrangements have been entered into during the year, nor existed
at the end of the year, in which a director or key manager had a material interest.
Details of key management compensation are given in note 9.
162
32. Business combinations
On 21 July 2023, Gooch & Housego PLC acquired the entire issued share capital of Artemis
Optical Holdings Limited (“Artemis”), a thin-film coating company. This acquisition
enhances G&H’s product portfolio and creates new opportunities for vertical integration
and the cross selling of the Group’s combined capabilities.
Provisional details of the purchase consideration, the net assets acquired and goodwill are
as follows:
Purchase consideration
Cash paid
Ordinary shares issued
Contingent consideration
Deferred consideration
Discount on contingent consideration net of deferred tax
Total purchase consideration
The fair value of the 412,088 shares issued as part of the consideration paid for Artemis
was based on the published share price on 20 July 2023 of 580p per share.
Acquisition costs of £412,000 are included within administration expenses
in the income statement.
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash
Trade and other receivables
Inventories
Plant and equipment
Right of use assets
Current tax assets
Loans
Lease liabilities
Intangible assets – customer relationships
Intangible assets – brand
Intangible assets – orderbook
Trade and other payables
Deferred tax liabilities
Add: goodwill
Net assets acquired
The goodwill is attributable to the workforce and the future profitability of the acquired
business. It will not be deductible for tax purposes.
In the event that certain pre-determined EBITDA targets are achieved by Artemis in the 12
month periods ended 31 July 2024 and 31 July 2025, additional consideration of up to £2m
might be payable in cash on or around 31 August 2024 and 31 August 2025. The fair value
of the contingent consideration of £1,730,000 was estimated by calculating the present
value of the future expected cash flows. The estimates are based on a discount rate of 14.3%.
£155,000 of the consideration payable was retained to cover certain specific risk items.
This will be payable in equal instalments on the first and second anniversaries of the
acquisition.
The acquired business contributed revenues of £794,000 and net loss of £56,000 to the
Group for the period from 21 July 2023 to 30 September 2023.
If the acquisition had occurred on 1 October 2022, consolidated pro-forma revenue and
profit after tax for the year ended 30 September 2023 would have been £152.2m and
£5.1m respectively.
£’000
3,077
2,390
2,000
155
(270)
7,352
Provisional
fair value
£’000
58
723
616
531
1,172
183
(54)
(1,121)
1,959
524
173
(1,501)
(900)
4,989
7,352
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE GROUP FINANCIAL STATEMENTS
163
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less cash acquired
Net outflow of cash – investing activities
On 20 June 2023, Gooch & Housego PLC acquired the entire issued share capital of GS Optics LLC
(“GS Optics”), a specialist in the custom design and manufacture of precision polymer optics for
use in the biomedical, machine vision and analytical instrument markets. This acquisition increases
G&H’s commercial footprint in high-growth areas within the large US life sciences marking including
ophthalmic lenses, surgical imaging and diagnostic instrumentation.
Provisional details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration
Cash paid
Ordinary shares issued
Deferred consideration
Total purchase consideration
The fair value of the 322,115 shares issued as part of the consideration paid for Artemis
was based on the published share price on 19 June 2023 of £6.36 per share.
Acquisition costs of £536,000 are included within administration expenses in the income statement.
The assets and liabilities recognised as a result of the acquisition are as follows:
Trade and other receivables
Inventories
Right of use assets
Plant and equipment
Deferred tax assets
Intangible assets – customer relationships
Intangible assets – brand
Trade and other payables
Lease liabilities
Add: goodwill
Net assets acquired
The goodwill is attributable to the workforce and the future profitability of the acquired business.
It will not be deductible for tax purposes.
In the event that certain pre-determined EBITDA targets are achieved by Artemis in the 12 month
period ended 31 December 2023, additional consideration of up to $1.85m might have been
payable in cash by 30 April 2024. The Directors do not believe that these targets will be met, and
therefore zero contingent consideration has been assumed in the provisional purchase price
allocation. £294,000 of the consideration was deferred and subsequently paid in November 2023.
The acquired business contributed revenues of £1,371,000 and net loss of £208,000 to the Group
for the period from 21 July 2023 to 30 September 2023.
If the acquisition had occurred on 1 October 2022, consolidated pro-forma revenue and profit after
tax for the year ended 30 September 2023 would have been £154.6m and £5.5m respectively.
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less cash acquired
Net outflow of cash – investing activities
2023
£’000
3,077
(58)
3,019
£’000
8,678
2,056
294
11,028
Provisional
fair value
£’000
856
562
2,205
1,549
79
1,127
886
(377)
(2,224)
6,365
11,028
2023
£’000
8,678
–
8,678
164
Company
Balance Sheet
As at 30 September 2023
Company number 00526832
Non-current assets
Investments
Property, plant and equipment
Investment properties
Intangible assets
Deferred income tax assets
Current assets
Other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Net current assets
Non-current liabilities
Deferred consideration
Deferred income tax liabilities
Net assets
Shareholders’ equity
Called up share capital
Share premium account
Merger reserve
Hedging reserve
Retained earnings
At 1 October
Profit/(loss) for the year
Other changes in retained earnings
Total equity
The financial statements on pages 164 to 181, were approved by the Board of Directors on
5 December 2023 and signed on its behalf by:
Charlie Peppiatt
Director
Chris Jewell
Director
Note
5
6a
6b
7
9
8
10
9
11
2023
£’000
43,181
199
3,173
782
394
47,729
17,496
1,011
18,507
(3,954)
14,553
(870)
(76)
(946)
61,336
5,159
16,051
8,890
15
31,144
2,920
(2,843)
31,221
61,336
Restated
2022
£’000
35,674
399
3,256
1,282
330
40,941
17,636
615
18,251
(3,706)
14,545
–
(15)
(15)
55,471
5,008
16,000
4,591
(1,272)
42,537
(9,031)
(2,362)
31,144
55,471
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS COMPANY FINANCIAL STATEMENTS
165
Company Statement
of Changes in Equity
For the year ended 30 September 2023
Company number 00526832
At 1 October 2021
Loss for the financial year
Total comprehensive expense for
the year
Dividends
Share based payments
Loss on cash flow hedge
Total contributions by and distributions
to owners of the parent recognised
directly in equity
At 30 September 2022
At 1 October 2022
Profit for the financial year
Total comprehensive income for
the year
Shares issued
Dividends
Share based payments
Gain on cash flow hedge
Total contributions by and distributions
to owners of the parent recognised
directly in equity
At 30 September 2023
Called up
share capital
Share premium
account
Note
£’000
5,008
£’000
16,000
Merger
reserve
£’000
4,591
4
4
–
–
–
–
–
–
–
–
–
–
–
–
5,008
16,000
5,008
16,000
–
–
151
–
–
–
151
–
–
51
–
–
–
51
–
–
–
–
–
–
4,591
4,591
–
–
4,299
–
–
–
4,299
Hedging
reserve
£’000
(135)
–
–
–
(1,137)
(1,137)
Retained
earnings
£’000
42,537
(9,031)
(9,031)
(3,105)
743
–
(2,362)
Total
equity
£’000
68,001
(9,031)
(9,031)
(3,105)
743
(1,137)
(3,499)
(1,272)
31,144
55,471
(1,272)
–
–
–
–
–
1,287
1,287
31,144
2,920
2,920
–
(3,180)
337
–
(2,843)
55,471
2,920
2,920
4,501
(3,180)
337
1,287
2,945
5,159
16,051
8,890
15
31,221
61,336
166
Company Cash
Flow Statement
For the year ended 30 September 2023
Company number 00526832
Cash flows from operating activities
Cash generated by/(used in) operations
Income tax repaid/(paid)
Net cash generated by/(used in) operating activities
Cash flows from investing activities
Acquisition of subsidiaries
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
Dividends received from subsidiaries
Net cash generated by investing activities
Cash flows from financing activities
Dividends paid to ordinary shareholders
Net cash used by financing activities
Net increase/(decrease) in cash
Cash at beginning of the year
Cash at the end of the year
2023
£’000
1,563
2
1,565
(3,077)
(7)
–
6
5,089
2,011
(3,180)
(3,180)
396
615
1,011
2022
£’000
(2,002)
(102)
(2,104)
–
(4)
(272)
–
5,215
4,939
(3,105)
(3,105)
(270)
885
615
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS COMPANY FINANCIAL STATEMENTS
167
Notes to the Company
Cash Flow Statement
For the year ended 30 September 2023
Reconciliation of cash generated by/(used in) operations
Profit/(loss) before income tax
Adjustments for:
- Dividends received from subsidiaries
- Amortisation of intangible assets
- Depreciation
- Share based payment obligations
- Loss on disposal of property, plant and equipment
- Impairment of investments
Total
Changes in working capital
- Trade and other receivables
- Trade and other payables
Total
Cash generated by/(used in) operating activities
Analysis of net cash
Cash at bank and in hand
Net cash
Analysis of net cash
Cash at bank and in hand
Net cash
2023
£’000
2,473
2022
£’000
(8,891)
(5,089)
(5,215)
500
290
183
–
–
(4,116)
5,081
(1,875)
3,206
1,563
466
462
465
1
16,241
12,420
(4,296)
(1,235)
(5,531)
(2,002)
At 1 Oct 2022
Cash flow
At 30 Sep 2023
£’000
615
615
£’000
396
396
£’000
1,011
1,011
At 1 Oct 2021
Cash flow
At 30 Sep 2022
£’000
885
885
£’000
(270)
(270)
£’000
615
615
168
Notes to the Company
Financial Statements
For the year ended 30 September 2023
1. Company accounting policies
Basis of preparation
These financial statements have been prepared under the historical
cost convention as modified by financial assets and liabilities at fair
value and in accordance with UK adopted International Accounting
Standards and with the requirements of the Companies Act 2006
as applicable to companies reporting under those standards. The
financial statements have been prepared on a going concern basis.
The Directors have reviewed the current financial projections for
FY2024 and FY2025. They have assessed the future funding
requirements of the Company and compared them with available
cash balances.
The Directors have considered the going concern review performed
for the Group financial statements in assessing the status of the
parent company. Noting that work, and the strength of the Company
balance sheet, the Directors are satisfied that the Company has
adequate resources to continue in operational existence for at
least 12 months from the date of approval of the financial
statements. For this reason they continue to adopt the going
concern basis in preparing the Company financial statements.
properties have been restated from £nil to £3,338,000 and
freehold land and buildings within property, plant and equipment
restated from £3,338,000 to £nil.
New standards and interpretations not yet adopted
The following amended standards and interpretations were
effective for the financial year ended 30 September 2023, however,
they have not had a material impact on our financial statements:
• Annual Improvements 2018-2020.
• Narrow scope amendments to IFRS 3, IAS16 and IAS38.
None of the amendments to the above standards had a material
impact on the Financial Statements. The following other amended
standards and interpretations have been issued but were not
mandatory for the financial year ended 30 September 2023.
These are not expected to have a material impact on the
consolidated financial statements.
• Narrow scope amendments to IAS1, IAS 8 and IFRS Practice
Statement 2.
• Amendments to IAS 12 ‘Taxation’.
The Directors do not believe there are any critical accounting
estimates or judgements that affect the amounts reported in the
company financial statements.
• Amendments to IAS 8 Accounting Policies, Changed in Accounting
Estimates and Errors: Definition of Accounting Estimates.
Prior year adjustment
The Company owns freehold land and buildings, which are rented
out to a subsidiary undertaking. Within the Group financial
statements, these freehold land and buildings have been correctly
included within property plant and equipment, but in prior years
these have also been included within property, plant and
equipment within the financial statements of the entity. However,
in accordance with IAS 40 ‘Investment Property’, the Company
has restated its comparatives to reclassify these freehold
properties from property plant and equipment to investment
properties. Accordingly a prior year adjustment has been made
to reclassify these freehold properties at a net book value of
£3,256,000 at 30 September 2022 (£3,338,000 at 30
September 2021) from property, plant and equipment to
investment property. There is no impact on the income
statement, the net assets or the statement of changes in equity
of the company in the current year or prior years as, in accordance
with IAS 40, the Company adopts the cost model and shows
investment properties at cost less accumulated depreciation
and any accumulated impairment losses, as disclosed in the
accounting policies of the Company. As a result of the prior year
adjustment, at 30 September 2022 investment properties have
been restated from £nil to £3,256,000 and freehold land and
buildings within property, plant and equipment restated from
£3,256,000 to £nil and at 30 September 2021 investment
• Amendment to IAS12 – International Tax Reform – pillar two
model rules.
Work will continue in the new financial year to assess the impact
of the new standards and interpretations on the Company’s
Financial Statements.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have
been consistently applied to all of the years presented, unless
otherwise stated.
Pension schemes
The Company operates a money purchase pension scheme
for Directors and staff. The assets of the scheme are held in
separately administered funds. Contributions are recognised
as an employee benefit expense in the income statement when
they are due. Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in the future
payments is available.
Share options
The Company operates a number of share option schemes. In
accordance with IFRS 2 the fair value of the employee services
received in exchange for the grant of the options is recognised as an
expense in the income statement. The total amount to be expensed
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
169
over the vesting period is determined by reference to the fair value
of the options granted, excluding the impact of any non-market
vesting conditions (for example, profitability targets). Non-market
vesting conditions are included in assumptions about the number
of options that are expected to vest.
Employer’s National Insurance in the United Kingdom and
equivalent taxes in other jurisdictions are payable on the exercise
of certain share options. In accordance with IFRS 2, this is treated
as a cash-settled transaction. A provision is made, calculated using
the fair value of the Company’s shares at the balance sheet date,
pro-rated over the vesting period of the options.
At each balance sheet date, for awards with non-market vesting
conditions, the entity revises its estimates of the number of
options that are expected to vest. It recognises the impact of the
revision to original estimates, if any, in the income statement, with
a corresponding adjustment to equity. The fair value of the options
under the Gooch & Housego 2013 Long Term Incentive Plan are
determined by using the Monte Carlo option pricing model.
The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share
premium when the options are exercised.
reversal of the temporary difference is controlled by the Group
and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax is recognised in the income statement except
to the extent that it relates to items recognised directly in other
comprehensive income and equity, in which case it is recognised in
other comprehensive income and equity.
In the UK and US, the Company is entitled to a tax deduction for
amounts treated as compensation on exercise of certain employee
share options under each jurisdiction’s tax rules. As explained
under “Share options” on the previous page, a compensation
expense is recorded in the Company’s income statement over
the period from the grant date to the vesting date of the relevant
options. As there is a temporary difference between the accounting
and tax bases, a deferred income tax asset is recorded. The deferred
income tax asset arising is calculated by comparing the estimated
amount of tax deduction to be obtained in the future (based on the
Company’s share price at the balance sheet date) with the
cumulative amount of the compensation recorded in the income
statement. If the amount of estimated future tax deduction exceeds
the cumulative amount of the remuneration expense at the
statutory rate, the excess is recorded directly in equity.
Derivatives and hedging activities
The Company transacts derivative financial instruments to manage
the underlying exposure to foreign exchange risk. The Company does
not transact derivative financial instruments for trading purposes.
Foreign currency translation
a. Functional and presentation currency
The financial statements are presented in Pounds Sterling, which
is the Company’s presentation currency.
Financial instruments are initially recognised at fair value on the
date that a contract is entered into and are subsequently
remeasured at their fair value. The Company documents the
relationship between the hedging instrument and the hedged item
and, on a periodic basis, assesses whether the hedge is effective.
The hedges entered into during FY2023 have been assessed as
effective and therefore the Company has applied hedge
accounting. Accordingly, movements in the fair value of the
hedges have been recorded in reserves.
Deferred tax
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. However, the deferred income tax is not accounted
for, if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries, except where the timing of the
b. Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
balance sheet exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement, except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges.
Investments
Investments are stated at cost less provision for any impairment
in value. Where overseas borrowing is required to finance the
investment in overseas subsidiaries, the investment is retranslated
at the exchange rate ruling at the balance sheet date.
Investment properties
The Company adopts the cost model and shows investment
properties at cost less accumulated depreciation and any
accumulated impairment losses. As investment properties are
occupied by a subsidiary, they do not meet the definition of
investment properties for the Group. See prior year adjustment
paragraph in note 1 on page 155 for further details. Depreciation
on investment properties is calculated to allocate their cost over
their estimated useful lives at 2-3% on a straight line basis.
170
Property, plant and equipment
Property, plant and equipment is stated at historical purchase cost
less accumulated depreciation. Cost includes expenditure that is
directly attributable to the acquisition of the items. No depreciation
is charged on freehold land or capital work in progress. Depreciation
on other assets is calculated to allocate their cost over their
estimated useful lives, as follows:
Plant and machinery
Fixtures and fittings
Computer equipment
6-20% Straight line
6-33% Straight line
25-33% Straight line
Intangible assets
Intangible assets include costs relating to computer systems
development, computer software and other intangible assets.
These costs are amortised over their useful economic lives
as follows:
Computer software
Systems
Patents & Licences (other)
5 years Straight line
5 years Straight line
3 years Straight line
Trade payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
2. Company profit and loss account
Gooch & Housego PLC has taken advantage of section 408(3) of
the Companies Act 2006 and has not included its own profit and
loss account in these financial statements. The Company’s profit /
loss after tax was £2,920,000 (2022: £9,031,000 loss).
Fees payable to the Company auditors for the statutory audit for
the year amounted to £22,000 (2022: £17,500).
3. Employee benefit expense
Wages and salaries
Compensation for loss of office
Social security costs
Medical and other insurances
Share based payments
Other pension costs
2023
£’000
3,681
37
224
28
183
82
4,235
2022
£’000
2,567
366
287
39
465
87
3,811
The average number of employees during the year was 23
(2022: 21), all of whom were administrative.
Directors’ remuneration and key management compensation
2023
£’000
1,375
162
–
26
10
10
1,583
2022
£’000
901
412
366
24
–
10
1,713
Other receivables
Other receivables, which largely comprise amounts due from
subsidiary companies, are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment of expected
credit losses.
Directors’ remuneration
Share based payments
Compensation for loss of office
Medical and other insurances
Company car allowance
Directors’ pension scheme
contributions
Dividend distribution
Dividend distributions to the Company’s shareholders are recognised
as a liability in the Company’s financial statements in the period in
which the dividends are approved by the Company’s shareholders.
The aggregate emoluments of the highest paid Director were
£680,000 (2022: £724,000). Further information is included
in the Remuneration Committee report on page 87.
The aggregate gain on Directors’ share option exercises in the
year was nil (2022: nil).
The number of Directors who are accruing retirement benefits
under a money purchase pension scheme is 1 (2022: 1).
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Capital risk management
Details of the ways in which the Company manages capital risk
are given in note 29 to the Group financial statements.
Critical accounting estimates and judgements
Carrying value of investments
The Directors have assessed the carrying value of the Company’s
investments during the year. The assessment requires an estimate
of the recoverable amount of the investment, which is based on
forecast cash flows and is therefore inherently uncertain. See note
5 for details of the carrying value of investments.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
171
4. Dividends
Final 2022 dividend paid: 7.7p per
share. (Final 2021 dividend paid
in 2021: nil per share)
2023 Interim dividend paid: 4.8p per
share (2022: 4.7p per share)
2023
£’000
1,978
1,202
3,180
2022
£’000
1,928
1,177
3,105
The Directors have proposed a final dividend of 8.2p (2022: 7.9p)
for the financial year ended 30 September 2023, making the
dividend for the full year 13.0p (2022: 12.6p per share).
The total value of the proposed final dividend is £2,114,000 (2022:
£1,978,000).
5. Investments
Cost and net book value at 1 October
Additions related to share based
payments for subsidiary employees
Additions
Transfer to subsidiary
Impairment of investments
2023
£’000
35,674
154
18,381
(11,028)
–
Cost and net book value at 30 September
43,181
2022
£’000
51,638
277
–
–
(16,241)
35,674
The impairment charge in the year ending 30 September 2022
of £16.2m related to the Company’s investments in Spanoptic
Limited and Kent Periscopes Limited. As part of the Group’s site
rationalisation, the trade and assets of these two companies
were transferred to Gooch & Housego (UK) Limited. Following the
transfers, the remaining value of these investments was assessed
by the Directors as nil, and therefore the carrying value of the
investments has been fully impaired.
The Company acquired the entire share capital of GS Optics LLC
on 20 June 2023. The investment was immediately transferred
at cost to G&H US Holdings Limited, a fully owned subsidiary of
the Company.
The company acquired the entire share capital of Artemis
Optical Holdings Limited on 21 July 2023. Further details
are given in note 32 to the Group financial statements. The
consideration payable was cash of £3,077,000, ordinary shares of
£2,390,000, contingent consideration of £1,730,000 and deferred
consideration of £155,000.
172
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
5. Investments (continued)
The subsidiary companies at 30 September 2023, all of which are
wholly owned either directly or indirectly, are listed below:
COMPANY NAME
% OWNERSHIP
OF ORDINARY
SHARES
REGISTERED OFFICE
ACTIVITY
Gooch & Housego (UK) Limited*
100%
Dowlish Ford, Ilminster, Somerset, TA19 0PF
Manufacturer of acousto-optic products and
precision optics
Gooch & Housego (Torquay) Limited*
Spanoptic Limited*
Kent Periscopes Limited*
Gooch & Housego (Deutschland)
GmbH*
100%
100%
100%
100%
Dowlish Ford, Ilminster, Somerset, TA19 0PF
Manufacturer of fibre-optic products
Telford Road, Glenrothes, KY7 4 NX
Non-trading company
6 Ffordd Richard Davies St Asaph, LL17 0LJ
Non-trading company
Berliner Allee 55, 22850 Norderstedt, Germany
Gooch & Housego (Ohio) LLC
100%
676 Alpha Drive, Highland Heights, OH44143, USA
Provider of sales and customer
service functions
Manufacturer of electro-optic products
and crystals
Gooch & Housego (California) LLC
EM4 Inc.
Gooch & Housego (Palo Alto) LLC
100%
100%
100%
5390 Kazuko Court, Moorpark, CA93021, USA
Manufacturer of precision optics
7 Oak Park Drive, Bedford, MA 01730, USA
Manufacturer of fibre optics products
44247 Nobel Dr, Fremont, CA94538, USA
Manufacturer of acousto-optic, electro-optic
and fibre optic components and systems
Designer and manufacturer of optical and
opto-mechanical subsystems
StingRay Optics LLC
100%
17A Bradco. Street, Keene, NH 03431 USA
Gooch & Housego Japan KK*
G&H (Property) Holdings Limited*
G&H (US Holdings) Limited*
G&H Holdings (Delaware) Inc.
G&H Capital Holdings (Florida) LLC
Integrated Technologies Limited
Integrated Technologies (Holdings)
Limited
ORF Limited
VITL Limited*
ITL (Virginia) Inc.
Integrated Electronic Systems
(Shanghai) Ltd
Artemis Optical Holdings Ltd*
Artemis Optical Ltd
GS Optics LLC
100%
100%
100%
100%
100%
100%
Level 4, Nikko Shiken Building, 3-2-3 Sakae,
Nagoya, Japan
Provider of sales and customer
service functions
Dowlish Ford, Ilminster, Somerset, TA19 0PF
Property holding company
Dowlish Ford, Ilminster, Somerset, TA19 0PF
Holding company
676 Alpha Drive, Highland Heights, OH44143, USA
Holding company
676 Alpha Drive, Highland Heights, OH44143, USA
Non-trading company
Viking House, Ellingham Way, Ashford, TN23 6NF
Development and manufacture of high quality
medical and in vitro diagnostic devices
100%
Viking House, Ellingham Way, Ashford, TN23 6NF
Non-trading company
100%
100%
100%
100%
100%
100%
100%
Viking House, Ellingham Way, Ashford, TN23 6NF
Non-trading company
Viking House, Ellingham Way, Ashford, TN23 6NF
Holding company
305 Ashcake Rd, VA23005, USA
Development and manufacture of high quality
medical and in vitro diagnostic devices
T3-11 Factory Building Unit 201, 5001 Huadong
Road, Shanghai 201201 China
Development and manufacture of high quality
medical and in vitro diagnostic devices
1 Western Wood Way, Langage Science Park,
Plympton, Plymouth, PL7 5BG
Holding company
1 Western Wood Way, Langage Science Park,
Plympton, Plymouth, PL7 5BG
Thin-film coating company
Viking House, 408 St Paul Street, Rochester,
New York, 14605, USA
Design and manufacture of precision
polymer optics
The directors believe that the carrying value of the investments is supported by their
underlying net assets.
* these investments are held directly by Gooch & Housego PLC. All UK subsidiaries are
exempt from the requirement to file audited financial statements by virtue of Section
479A of the Companies Act 2006. As part of this process, the Company has provided
statutory guarantees to these subsidiaries.
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
6a. Property, plant and equipment
Restated
Cost or valuation
At 1 October 2021
At 30 September 2022
Additions
At 30 September 2023
Accumulated depreciation
At 1 October 2021
Charge for the year
Disposal
At 30 September 2022
Charge for the year
At 30 September 2023
Net book value
At 30 September 2021
At 30 September 2022
At 30 September 2023
Plant and
machinery
£’000
Fixtures and
fittings
£’000
Computer
equipment
£’000
3,987
3,987
–
3,987
3,381
266
–
3,647
152
3,799
606
340
188
1,392
1,392
–
1,392
1,262
93
–
1,355
36
1,391
130
37
1
233
233
7
240
193
21
(3)
211
19
230
40
22
10
173
Total
£’000
5,612
5,612
7
5,619
4,836
380
(3)
5,213
207
5,420
776
399
199
Further detail in respect of the restatement is given in note 1.
6b. Investment properties
Restated
Cost or valuation
At 1 October 2021
At 30 September 2022
At 30 September 2023
Accumulated depreciation
At 1 October 2021
Charge for the year
At 30 September 2022
Charge for the year
At 30 September 2023
Net book value
At 30 September 2021
At 30 September 2022
At 30 September 2023
Further detail in respect of the restatement is given in note 1.
The fair value of the investment property is not materially different to the book value
disclosed above.
Investment Properties
Restated
£’000
4,432
4,432
4,432
1,094
82
1,176
83
1,259
3,338
3,256
3,173
174
7. Intangible assets
Cost or valuation
At 1 October 2021
Additions
At 30 September 2022
Additions
At 30 September 2022
Accumulated amortisation
At 1 October 2021
Charge for the year
At 30 September 2022
Charge for the year
At 30 September 2023
Net book value
At 30 September 2021
At 30 September 2022
At 30 September 2023
8. Other receivables
Prepayments and accrued income
Intercompany receivables
Systems
£’000
Computer
software
£’000
Patents and
licences
£’000
2,125
75
2,200
–
2,200
705
425
1,130
440
1,570
1,420
1,070
630
904
197
1,101
–
1,101
850
39
889
60
949
54
212
152
64
–
64
–
64
62
2
64
–
64
2
–
–
Total
£’000
3,093
272
3,365
–
3,365
1,617
466
2,083
500
2,583
1,476
1,282
782
2022
£’000
461
17,175
17,636
2022
£’000
205
110
315
2022
£’000
292
(15)
38
315
2023
£’000
417
17,079
17,496
2023
£’000
315
93
(90)
318
2023
£’000
339
55
(76)
318
9. Deferred tax
The movement in the deferred tax assets and liabilities during the year was as follows:
At 1 October
Credited to the income statement
Arising on acquisition
At 30 September
The deferred tax provided for in the financial statements can be analysed as follows:
Property, plant and equipment
Intangible assets
Other timing differences
All movements on deferred tax were recognised in the income statement in the year ended 30 September
2023 and 30 September 2022.
The current portion of the deferred tax asset is £0.1m (2022: £0.1m).
Factors affecting the future tax charge
In the Spring Budget 2021, the UK Government announced that from 1 April 2023 the corporation tax
rate would increase to 25% (rather than remaining at 19%, as previously enacted). This new law was
substantively enacted on 24 May 2021. Deferred taxes at the balance sheet date have been measured
using these enacted tax rates and reflected in these financial statements.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
175
10. Trade and other payables
Trade payables
Amounts owed to group undertakings
Taxation and Social Security
Derivative financial instruments
Deferred consideration
Accruals and deferred income
Amounts owed to group undertakings are unsecured and due within one year. Non trading
amounts owed to US group undertakings are charged interest at the SOFR rate applicable
for the year. Non-trading amounts owed to UK group undertakings are charged interest at
rates specified in the loan agreements.
11. Called up share capital
Allotted, issued and fully paid
At 1 October
Shares issued and fully paid
At 30 September
2023
Number
2022
Number
25,040,919
25,040,919
745,478
–
25,786,397
25,040,919
11,275 shares were allotted under share option schemes during the year ended
30 September 2023 (2022: nil). The remaining 734,203 shares issued in the
year were issued as part consideration for the acquisitions of GS Optics and
Artemis Optical Holdings Limited.
The company does not have a limited amount of authorised capital.
2023
£’000
313
1,230
–
–
980
1,431
3,954
2023
£’000
5,008
151
5,159
2022
£’000
449
859
90
1,272
–
1,036
3,706
2022
£’000
5,008
–
5,008
176
12. Financial instruments
The Company’s financial instruments comprise cash at bank, financial derivatives and various
items such as trade receivables and trade payables that directly arise from its operations.
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity
risk and foreign currency risk.
The Board’s policy on these risks and capital risk management is set out in note 29 to the
Group financial statements.
Operations are financed through a mixture of retained profits, cash reserves, group borrowings
and leases. The Board’s policy is to use variable rate borrowings whenever possible.
The currency profile for the Company’s financial assets and liabilities are set out below.
Pound Sterling
US Dollars
Euro
Financial assets
Financial liabilities
2023
£’000
900
118
8
1,026
2022
£’000
518
55
42
615
2023
£’000
–
–
–
–
2022
£’000
–
1,272
–
1,272
The financial assets listed in the above table are subject to floating rates of interest. The
financial assets include cash at bank and derivative financial instruments but exclude
short-term receivables, prepayments and other receivables. The financial liabilities include
derivative financial instruments. Other short-term payables are excluded from this disclosure.
At the year end, the Company had contracts to sell $10.0m in the period to 30 September 2024
(2022: contracts to sell $11m in the period to 30 September 2022). The fair value of these
contracts, of £15,000, has been included in payables on the balance sheet (2022: £1.3m liability).
Cash and bank borrowings are stated at amortised cost. Derivative financial instruments,
being currency contracts, are valued at level 2 fair values based on the present value of future
cash flows based on the forward exchange rates at the balance sheet date.
13. Share options
The Company operates the Gooch & Housego 2013 Long Term Incentive Plan (the 2013 LTIP),
the Gooch & Housego Save As You Earn Scheme, the Gooch & Housego ESPP scheme and the
Gooch & Housego PLC Restricted Stock Units Plan.
A reconciliation of total share option movements across these schemes is shown below:
2023
2022
Outstanding at 1 October
Awarded
Exercised
Adjustment
Lapsed
Outstanding at 30 September
Exercisable at 30 September
Number
457,515
409,782
(11,275)
2,323
(190,283)
668,062
–
Weighted average
exercise price (£)
0.84
–
(4.64)
4.64
(0.36)
0.33
–
Number
392,276
167,929
–
–
(102,690)
457,515
–
Weighted average
exercise price (£)
1.18
–
–
–
(0.76)
0.84
–
The adjustment shown above relates to the ESPP scheme. Under this scheme, the exercise
price of options was not set until the scheme matured. It was not therefore possible to
quantify the exact number of options until the scheme matured.
The weighted average remaining contractual life of the options outstanding at 30 September
2023 was 2.7 years (2022: 1.8 years).
The total charge for the year relating to share options was £183,000 (2022: £465,000), all of
which related to equity-settled share based payment transactions.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
177
13. Share options (continued)
The Gooch & Housego 2013 Long Term Incentive Plan
The Gooch & Housego 2013 Long Term Incentive Plan was adopted on 9 April 2013. Under
the plan, awards are made annually to key employees based on a percentage of salary.
Subject to the satisfaction of the required Total Shareholder Return performance criteria
and Earnings Per Share financial performance, these grants will vest upon publication of
the results of the Group three years after the grant date.
There have been ten grants of options under the 2013 Long Term Incentive Plan, which
will expire in 2023. The remuneration report provides further details on the share options
awarded and exercised during the financial year.
The 2013 Long Term Incentive Plan Awards were valued using the Monte Carlo option
pricing model. The expected volatility used in the model was based on the historical
volatility of the Company’s share price over the three years prior to the grant date.
The details of awards extant as at 30 September 2023 are summarised below:
No. of options granted
Expected volatility
Risk free rate
Option term
Fair value (£)
Exercise price
Expected dividend yield
Share price at grant date
9 Jan 2023
409,782
44%
2.00%
3 years
1,537,338
nil
2.1%
530p
Grant date
13 Jan 2022
142,380
46%
0.76%
3 years
1,119,282
nil
1%
1175p
7 Jan 2021
174,781
46%
0.76%
2-3 years
1,751,334
nil
1%
1198p
A reconciliation of LTIP option movements is shown below:
Outstanding at 1 October
Awarded
Exercised
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
398,317
409,782
–
(184,449)
623,650
–
Weighted average
exercise price (£)
–
–
–
–
–
–
Number
351,868
142,380
–
(95,931)
398,317
–
Weighted average
exercise price (£)
–
–
–
–
–
–
The weighted average fair value of options granted in the year was 375.0p per option
(2022: 550.0p per option).
The weighted average remaining contractual life of LTIP options outstanding at
30 September 2023 was 2.8 years (2022: 1.9 years).
The total share-based payments charge for the year ended 30 September 2023
relating to the 2013 LTIP scheme was £175,000 (2022: £463,000).
178
13. Share options (continued)
The Gooch & Housego PLC Save As You Earn Scheme
The Gooch & Housego PLC Save As You Earn Scheme was established in February 2021
and is open to all UK employees. Under the scheme, employees choose to save a fixed
monthly amount from their net pay of between £5 and £100. At the start of the savings
period, participants are awarded options at a discount of 10% to the market value at that
date. At the end of the three-year savings period, participants can either withdraw their
savings or exercise their options to acquire shares at the option price. 31,749 options were
granted under this scheme on 26 March 2021.
Outstanding at 1 October
Awarded
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
24,697
–
(5,835)
18,862
–
Weighted average
exercise price (£)
11.59
–
11.59
11.59
–
Number
31,284
–
(6,587)
24,697
–
Weighted average
exercise price (£)
11.59
–
11.59
11.59
–
There were no options granted under the Save As You Earn Scheme in the year ended
30 September 2023 or 30 September 2022.
Share options outstanding at the end of the year expire one year after their respective
vesting dates and have the following exercise prices:
G&H PLC Save As You Earn Scheme
£11.59
Exercise price per share option
The weighted average remaining contractual life of SAYE options outstanding at
30 September 2023 was 0.5 years (2022: 1.5 years).
The total share-based payments charge for the year ended 30 September 2023
relating to the SAYE scheme was £18,000 (2022: £2,000).
Number of share options
2023
18,862
2022
24,697
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
179
13. Share options (continued)
The Gooch & Housego PLC Employee Stock Purchase Plan
The Gooch & Housego PLC Employee Stock Purchase Plan was established in February
2021 and is open to all US employees. Under the Plan, participants save a fixed monthly
amount of between $5 and $135 over the two year savings period. At maturity of the
savings period, employees are able to withdraw their savings, or exercise their options at
a price equal to the lower of a 10% discount to the market price at the start of the savings
plan and a 10% discount to the market price at the end of the savings plan.
The initial award under the Employee Stock Purchase Plan matured on 1 May 2023 and
there are no outstanding options as at 30 September 2023. The option price was set at a
10% discount to the closing share price on 30 April 2023.
Outstanding at 1 October
Awarded
Adjustment
Exercised
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
8,952
–
2,323
(11,275)
–
–
–
Weighted average
exercise price (£)
11.14
–
4.64
4.64
–
–
–
Number
9,124
–
–
–
(172)
8,952
–
Weighted average
exercise price (£)
11.14
–
–
–
11.14
11.14
–
There were no options granted under the Employee Stock Purchase Plan during the year
ended 30 September 2023 or 30 September 2022.
Share options outstanding at the end of the year expire one year after their respective
vesting dates and have the following exercise prices:
Employee Stock Purchase Plan
Exercise price per share option
£4.64
2023
–
2022
8,952
Number of share options
The weighted average remaining contractual life of Employee Stock Purchase Plan
options outstanding at 30 September 2022 was 0.5 years.
The total share-based payments charge for the year ended 30 September 2023 relating
to the Employee Stock Purchase Plan was £nil (2022: £nil).
180
13. Share options (continued)
Gooch & Housego PLC Restricted Stock Units (RSUs)
An award of restricted stock units was made to a senior US based employee in the year
ended 30 September 2022. A total of 25,549 units were awarded on 30 May 2022,
with a vesting commencement date of 14 April 2022. There are no performance criteria
attached to these RSUs, one third of which will vest on 14 April 2024 and the remaining
two thirds will vest on 14 April 2025 provided the beneficiary is still employed by G&H
on those dates.
Outstanding at 1 October
Awarded
Lapsed
Outstanding at 30 September
Exercisable at 30 September
2023
2022
Number
25,249
–
–
25,249
–
Weighted average
exercise price (£)
–
–
–
–
–
Number
–
25,549
–
25,249
–
Weighted average
exercise price (£)
–
–
–
–
–
The weighted average fair value of options granted in the year ended 30 September 2022
was 990p per option.
Share options outstanding at the end of the year expire one year after their respective
vesting dates and have the following exercise prices:
Restricted stock units
Exercise price per share option
–
2023
25,549
2022
25,549
Number of share options
The weighted average remaining contractual life of Restricted Stock Units outstanding at
30 September 2023 was 1.3 years (2022: 2.2 years).
The total share-based payments charge for the year ended 30 September 2022 relating
to the Restricted Stock Units Plan was £nil (2022: £nil).
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
181
14. Related party disclosures
The company recharges certain costs to, and is recharged certain costs by, its subsidiary
companies in the ordinary course of business. The closing balances due from and to the
subsidiary companies are shown in notes 8 and 10 respectively.
The amounts recharged to Gooch & Housego PLC by group undertakings during
the year ended 30 September were:
EM4 Inc
Gooch & Housego (Palo Alto) LLC
Gooch & Housego (Ohio) LLC
Gooch & Housego (UK) Limited
Gooch & Housego (Torquay) Limited
Gooch & Housego (Deutschland) GmBH
Gooch & Housego Japan KK
The amounts recharged by Gooch & Housego PLC to group undertakings during
the year ended 30 September were:
EM4 Inc
Gooch & Housego (Ohio) LLC
Gooch & Housego (UK) Limited
Gooch & Housego (California) LLC
Gooch & Housego (Palo Alto) LLC
StingRay Optics LLC
Gooch & Housego (Torquay) Limited
Integrated Technologies Limited
The amounts receivable from/(payable to) subsidiary undertakings
as at 30 September were:
EM4 Inc
G&H (US Holdings) Limited
Gooch & Housego (UK) Limited
Gooch & Housego (Palo Alto) LLC
Spanoptic Limited
Artemis Optical Limited
Gooch & Housego (Deutschland) GmBH
Gooch & Housego Japan KK
G&H Holdings (Delaware) Inc.
Integrated Technologies Limited
During the year Gooch & Housego PLC received dividends of £3.5m, £0.1m, £0.4m, £0.4m,
£0.4m and £0.3m respectively from Gooch & Housego (Torquay) Limited, G&H (Property)
Holdings Limited, Gooch & Housego (Ohio) Limited, Gooch & Housego (Palo Alto) LLC, G&H
Holdings (Delaware) Inc and Integrated Technologies Limited. In the prior year, Gooch &
Housego PLC received dividends of £0.2m, £0.6m, £2.7m and £1.7m respectively from G&H
(Property) Holdings Limited, Gooch & Housego (Torquay) Limited, Kent Periscopes Limited
and Integrated Technologies Limited. The total dividend received from subsidiary
undertakings during the year was £5.08m (2022: £5.2m).
No other material contracts or arrangements have been entered into during the year, nor
existed at the end of the year, in which a director or key manager had a material interest.
2023
£’000
44
88
–
31
28
385
319
895
2023
£’000
660
645
1,247
533
1,707
504
1,301
629
7,226
2023
£’000
–
7,339
8,569
(501)
(115)
1,152
(592)
(20)
–
18
15,850
2022
£’000
–
–
8
46
91
343
314
802
2022
£’000
687
638
1,789
537
1,560
550
1,312
585
7,658
2022
£’000
(362)
6,184
8,040
(140)
–
–
(357)
20
2,759
4
16,148
182
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
Shareholder
Information
SHAREHOLDER INFORMATION
183
182–191
184 Company Information
185 Expected Financial Calendar
186 Notice of Annual General Meeting
189 Notes
184
Company
Information
Legal
Information
Company Secretary
and Registered Office
Nominated Adviser and Broker
Company Secretary
Gareth J Crowe
Registered Office
Dowlish Ford
Ilminster
Somerset
TA19 0PF
United Kingdom
Company Number
00526832
Investec Bank PLC
2 Gresham Street
London
EC2V 7QP
Legal Advisers
Burges Salmon LLP
One Glass Wharf
Temple Quay
Bristol
BS2 0ZX
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
2 Glass Wharf
Temple Quay
Bristol
BS2 0FR
Registrars
Link Asset Services
65 Gresham Street
London
EC2V 7NQ
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 SHAREHOLDER INFORMATION COMPANY INFORMATION
185
Expected
Financial Calendar
Annual General
Meeting
Interim Results
Announcement
21
February
2024
Financial Year End
June
2024
Preliminary
Announcement
of Results for
the Year Ending
30 September 2024
30
September
2024
December
2024
186
Notice of Annual
General Meeting
Form of proxy
You will not receive a form of proxy for the 2024 AGM in the post. Instead,
you can vote online at www.signalshares.com. To register you will need
your Investor Code, which can be found on your share certificate.
Alternatively, you can vote via the LinkVote+ app or CREST. You will still be
able to attend and vote in person at the AGM and you may also request a
hard copy proxy form from our Registrars.
Should you require assistance please contact our registrar Link Group at
shareholderenquiries@linkgroup.co.uk or on 0371 664 0300.
Calls are charged at the standard geographic rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable international rate. Lines are open between
9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
SHAREHOLDER INFORMATION NOTICE OF ANNUAL GENERAL MEETING
187
Notice is hereby given that the Annual General Meeting of the Company
will be held at Dowlish Ford, Ilminster, Somerset, TA19 0PF on
21 February 2024 at 11.00 a.m. for the following purposes:
To consider and, if thought fit, to pass the following resolutions as
Ordinary Resolutions:
1
To receive the Annual Report and financial statements for
the financial year ended 30 September 2023 together
with the Directors’ Report and Auditors’ Report thereon.
2 To receive and approve the Remuneration Committee Report
set out on pages 110 to 117 (excluding pages 112 and 113) of the
Annual Report for the financial year ended 30 September 2023.
3
To declare a final dividend, as recommended by the Directors,
of 8.2p per ordinary share for the financial year ended 30
September 2023, payable on 23 February 2024 to those
members whose names appear in the Company’s register of
members at the close of business on 19 January 2024.
4 To re-elect Gary Bullard as a Director.
5 To re-elect Charlie Peppiatt as a Director.
6 To re-elect Chris Jewell as a Director.
7 To re-elect Brian Phillipson as a Director.
8 To re-elect Louise Evans as a Director.
9 To re-elect Jim Haynes as a Director.
10 To elect Susan Searle as a Director
11 To re-appoint PricewaterhouseCoopers LLP as Auditors to hold
office from the conclusion of this meeting to the conclusion of
the next meeting at which the Company’s annual accounts and
reports are laid before the Company.
12 To authorise the Directors to fix the remuneration of the Auditors.
13 THAT the Directors of the Company be, and they are hereby,
generally and unconditionally authorised in accordance
with section 551 of the Companies Act 2006 (the “Act”), in
substitution for any existing authority to the extent unused,
to exercise all the powers of the Company to allot shares in
the Company or grant rights to subscribe for or to convert any
security into shares in the Company on, and subject to, such
terms as the Directors may determine. The authority hereby
conferred shall, subject to section 551 of the Act, be for a period
commencing on the date of the passing of this Resolution
and expiring at the conclusion of the next Annual General
Meeting of the Company or 21 May 2025 (whichever is the
earlier) unless reviewed, varied or revoked by the Company in
General Meeting and the maximum nominal amount of shares
which may be allotted pursuant to such authority shall be
£1,719,093 (representing approximately one third of the total
ordinary share capital of the Company in issue at 5 December
2023). The Directors shall be entitled under such authority
to make at any time prior to the expiry of such authority any
offer or agreement which would or might require shares in the
Company to be allotted after the expiry of such authority and
the Directors may allot shares in pursuance of such offer or
agreement as if such authority had not expired.
188
To consider and, if thought fit, to pass the following
resolutions as Special Resolutions:
14 (a) THAT the Directors of the Company be, and they are hereby,
generally and unconditionally empowered pursuant to section
570 of the Companies Act 2006 (the “Act”), in substitution
for any existing authority to the extent unused, to allot equity
securities (as defined in section 560 of the Act) for cash
pursuant to the authority conferred by Resolution 13 above as if
section 561 of the Act did not apply to such allotment, provided
that the power hereby conferred shall be limited to:
15 THAT the Company be and is hereby generally and
unconditionally authorised for the purposes of section 701
of the Companies Act 2006 (the “Act”) to make one or more
market purchases (within the meaning of section 693(4) of the
Act) of fully paid ordinary shares of £0.20 each in the capital
of the Company on such terms and in such manner as the
Directors may determine, provided that:
(i) the allotment of equity securities in connection with an
offer of securities, open for acceptance for a period fixed
by the Directors, by way of rights to the holders of ordinary
shares in proportion (as nearly as may be) to the respective
numbers of ordinary shares held by them on a record date
fixed by the Directors and subject to such exclusions or
other arrangements as the Directors may deem necessary
or expedient to deal with legal or practical problems under
the laws of any overseas territory or the requirements of any
regulatory body or any stock exchange in any territory or in
connection with fractional elements or otherwise howsoever;
and
(ii) otherwise than pursuant to sub-paragraph (i) above, the
allotment of equity securities up to an aggregate nominal
amount of £257,864 (representing approximately 5 per
cent. of the total ordinary share capital of the Company in
issue at 5 December 2023); and
(b) THAT the Directors of the Company be authorised in
addition to any authority granted under Resolution 14(a) to
allot equity securities (as defined in section 560 of the Act) for
cash under the authority conferred by Resolution 13 above as
if section 561 of the Act did not apply to any such allotment,
provided that the power hereby conferred shall be:
(i) limited to the allotment of equity securities up to an
aggregate nominal amount of £257,864 (representing
approximately 5 per cent. of the total ordinary share capital
of the Company in issue at 5 December 2023); and
(ii) used only for the purpose of financing (or refinancing, if
the authority is to be used within 6 months after the original
transaction) a transaction which the Directors determine
to be an acquisition or other capital investment of a kind
contemplated by the Statement of Principles on Disapplying
Pre-Emption Rights most recently published by the Pre-
Emption Group prior to the date of this notice.
The powers hereby conferred in this Resolution 14 shall expire
at the conclusion of the next Annual General Meeting of the
Company or 21 May 2025 (whichever is the earlier), save
that the Company may before such expiry make an offer or
agreement which would or might require equity securities in
the Company to be allotted after such expiry and the Directors
may allot equity securities in pursuance of such offer or
agreement as if the power conferred hereby had not expired.
(a) the maximum aggregate number of ordinary shares
hereby authorised to be purchased is 2,578,640 (representing
approximately 10 per cent. of the total ordinary share capital of
the Company in issue at 5 December 2023);
(b) the minimum price (exclusive of expenses) which may be
paid for each ordinary share is 20 pence per share;
(c) the maximum price (exclusive of expenses) which may be paid
for each ordinary share shall not be more than the higher of:
(i) 5 per cent. above the average of the middle market
quotations for an ordinary share as derived from the AIM
section of the London Stock Exchange Daily Official List for
the five business days immediately preceding the date on
which the ordinary share is contracted to be purchased; and
(ii) the higher of the price of the last independent trade and the
higher current independent bid on the trading venue where
the purchase is carried out.
(d) unless previously renewed, varied or revoked, the authority
hereby conferred shall expire at the conclusion of the next
Annual General Meeting of the Company or 21 May 2025
(whichever is the earlier); and
(e) the Company may, pursuant to the authority hereby
conferred, enter into a contract to purchase ordinary shares
which would, will or might be executed wholly or partly after
the expiry of such authority and the Company may make a
purchase of ordinary shares in pursuance of such contract as if
the authority conferred hereby had not expired.
By order of the Board
Gareth J Crowe
Company Secretary
5 December 2023
Registered Office: Dowlish Ford, Ilminster, Somerset TA19 0PF
Registered Number: 00526832
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023
SHAREHOLDER INFORMATION NOTICE OF ANNUAL GENERAL MEETING
189
Notes
1
A member is entitled to appoint one or more proxies to exercise
all or any of the member’s rights to attend, speak and vote at the
meeting. A proxy need not be a member of the Company but
must attend the meeting for the member’s vote to be counted.
If a member appoints more than one proxy to attend the
meeting, each proxy must be appointed to exercise the rights
attached to a different share or shares held by the member.
2 Resolution 2 is an advisory vote only. The Remuneration
Committee Report is set out on pages 110 to 117 of the Annual
Report for the financial year ended 30 September 2023.
Pages 110, 111, 114, 115, 116 and 117 of the Remuneration Committee
Report set out the pay and benefits received by each of the
directors for the year ended 30 September 2023. The Company’s
policy on remuneration and potential pay outs to directors in
the future, which is set out on pages 112 and 113 of the Annual
Report for the financial year ended 30 September 2023, is
specifically excluded from this Resolution.
3
4
Resolutions 1 to 13 (inclusive) are proposed as Ordinary
Resolutions. This means that for those resolutions to be passed,
more than half of the votes cast on such resolutions must be in
favour of such resolutions. Resolutions 14 and 15 are proposed
as Special Resolutions. This means that for those resolutions to
be passed, at least three-quarters of the votes cast on such
resolutions must be in favour of such resolutions.
Shareholders are entitled to appoint another person as a proxy
to exercise all or part of their rights to attend and to speak and
vote on their behalf at the Meeting. A shareholder may appoint
more than one proxy in relation to the Meeting provided that
each proxy is appointed to exercise the rights attached to a
different ordinary share or ordinary shares held by that
shareholder. A proxy need not be a shareholder of the
Company. However, please see Note 1 above.
5
In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority
is determined by the order in which the names of the joint
holders appear in the Company’s Register of Members in respect
of the joint holding (the first named being the most senior).
6
A vote withheld is not a vote in law, which means that the vote
will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, your proxy will vote
or abstain from voting at his or her discretion. Your proxy will
vote (or abstain from voting) as he or she thinks fit in relation
to any other matter which is put before the Meeting.
7
You can vote by proxy either:
• by logging on to www.signalshares.com and following
the instructions;
• via the LinkVote+ app (refer to the notes below);
• in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with
the procedures set out below; or
• by submitting a paper proxy form (refer to the notes below).
Any power of attorney or other authority under which the proxy
is submitted must be returned to the Company’s Registrars,
Link Group, PXS1, Central Square, 29 Wellington Street, Leeds,
LS1 4DL. If a paper form of proxy is requested from the registrar,
it should be completed and returned to Link Group, PXS1,
Central Square, 29 Wellington Street, Leeds, LS1 4DL to be
received not less than 48 hours before the time of the meeting.
If you need help with voting online, or require a paper proxy
form, please contact our Registrar, Link Group by email at
shareholderenquiries@linkgroup.co.uk, or you may call Link on
0371 664 0300. Calls are charged at the standard geographic
rate and will vary by provider. Calls outside the United Kingdom
will be charged at the applicable international rate. We are open
between 09:00 – 17:30, Monday to Friday excluding public
holidays in England and Wales. Submission of a Proxy vote shall
not preclude a member from attending and voting in person at
the meeting in respect of which the proxy is appointed or at any
adjournment thereof.
8
For an electronic proxy appointment to be valid, the
appointment must be received by the Company’s Registrar,
Link Group, no later than 11.00am on 19 February 2024.
190
Notes Continued
13 CREST members and, where applicable, their CREST sponsors
or voting service providers should note that Euroclear
UK & International Limited does not make available special
procedures in CREST for any particular messages. Normal
system timings and limitations will therefore apply in relation
to the input of CREST Proxy Instructions. It is the responsibility
of the CREST member concerned to take (or, if the CREST
member is a CREST personal member or sponsored member
or has appointed a voting service provider(s), to procure that
his CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is
transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service providers
are referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST
system and timings (www.euroclear.com).
14 The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001 (as amended).
15 Unless otherwise indicated on the form of proxy, CREST voting
or any other electronic voting channel instruction, the proxy
vote will vote as (s)he thinks fit or, at his/her discretion,
withhold from voting.
16 Any electronic address provided either in this Notice or in any
related documents may not be used to communicate with the
Company for any purposes other than those expressly stated.
9
Only those members registered on the register of members
of the Company at close of business on 19 February 2024
(or, if the meeting is adjourned, 48 hours before the time of the
adjourned meeting) shall be entitled to attend and vote at the
meeting in respect of the number of shares registered in their
name at that time. Changes to the register of members after
the relevant deadline shall be disregarded in determining the
rights of any person to attend and vote at the meeting.
However, please see Note 1 above.
10 LinkVote+ is a free app for smartphone and tablet provided by
Link Group (the company’s registrar). It offers shareholders the
option to submit a proxy appointment quickly and easily online,
as well as real-time access to their shareholding records. The
app is available to download on both the Apple App Store and
Google Play, or by scanning the relevant QR code opposite.
11 CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the meeting and any adjournment(s) thereof
by using the procedures described in the CREST Manual.
CREST personal members or other CREST sponsored
members, and those CREST members who have appointed
a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to
take the appropriate action on their behalf.
12 In order for a proxy appointment or instruction made using
the CREST service to be valid, the appropriate CREST message
(a CREST Proxy Instruction) must be properly authenticated
in accordance with Euroclear UK & International Limited’s
specifications and must contain the information required for
such instruction, as described in the CREST Manual (available
via www.euroclear.com). The message, regardless of whether
it constitutes the appointment of a proxy, or is an amendment
to the instruction given to a previously appointed proxy must,
in order to be valid, be transmitted so as to be received by the
issuer’s agent (ID RA10) by the latest time(s) for receipt of
proxy appointments specified in Notes 7 and 8 above.
For this purpose, the time of receipt will be taken to be the time
(as determined by the time stamp applied to the message by
the CREST Application Host) from which the issuer’s agent is
able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time, any change of
instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 SHAREHOLDER INFORMATION NOTICE OF ANNUAL GENERAL MEETING
191
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192
GOOCH & HOUSEGO PLC ANNUAL REPORT 2023 I am confident we will build on the progress
made in our financial and operational
performance as well as the clear direction
from our new strategy to progress to
become a resilient and agile higher margin
business over the coming years for all our
stakeholders and realise our clear vision of
‘a better world with photonics’.”
Charlie Peppiatt, CEO
Gooch & Housego PLC
Dowlish Ford, Ilminster
TA19 0PF, United Kingdom
T: +44 (0)1460 256440
E: info@gandh.com
gandh.com