Earnings call transcript: Gooch & Housego Q1 2026 sees revenue beat, stock drops

Gooch & Housego Plc reported its financial results for the first half of 2026, showcasing a robust performance with revenue surpassing forecasts. The company achieved a revenue of GBP 81.9 million, exceeding the expected GBP 80.2 million, and an adjusted EPS of GBP 0.164, slightly above the forecast of 0.16. Despite these positive financial results, the company’s stock fell by 11.93% in pre-market trading, reflecting investor concerns over margin pressures and supply chain challenges.

Gooch & Housego delivered a strong financial performance in the first half of 2026, with a 15.5% increase in revenue compared to the same period last year. The company’s strategic acquisitions and organic growth contributed significantly to this achievement. However, gross margin contraction and ongoing supply chain challenges, particularly in the fiber optics and life sciences segments, tempered the positive results.

Gooch & Housego’s actual revenue of GBP 81.9 million exceeded the forecasted GBP 80.2 million, while the adjusted EPS of GBP 0.164 slightly beat the expected 0.16. This modest earnings surprise reflects the company’s consistent performance trend, although the market reaction suggests concerns over margin and supply chain issues.

Despite the earnings beat, Gooch & Housego’s stock fell by 11.93% in pre-market trading. This decline contrasts with the company’s positive financial performance, suggesting that investors are wary of ongoing margin pressures and supply chain disruptions. The stock remains within its 52-week range, indicating broader market influences may be at play.

The company maintains a positive outlook, with a strong order book providing near-full revenue cover for FY 2026. However, challenges such as supply chain disruptions and margin pressures remain. Gooch & Housego aims to continue its strategic investments in R&D and production capabilities to drive future growth.

CEO Mark Webster stated, "Our strong revenue growth and successful integration of recent acquisitions demonstrate our resilience and strategic focus. However, we remain vigilant about ongoing supply chain challenges and are committed to optimizing our operations to mitigate these impacts."

During the earnings call, analysts questioned the company’s strategies to address supply chain challenges and margin pressures. Executives emphasized their focus on strategic inventory investments and operational efficiencies to navigate these issues effectively.

Charlie, Chief Executive Officer, Gooch & Housego PLC: Good morning. Thank you to everyone attending in person today and to those joining on the webcast recording. Welcome to G&H’s interim results presentation for the half year ended the 31st of March 2026. Firstly, I’m very pleased to be able to introduce James Corte, our new CFO, who joined the group at the beginning of April. James and I will be following the agenda shown on the screen. After the highlights section, James will cover the group’s first half results. Then I will provide a segmental review and progress update on the implementation and delivery of our strategy, including outlook for the group. I would like to start by playing a short company introduction and overview video. Gooch & Housego is a global photonics company built on a simple idea, mastering light to solve complex challenges for our customers.

For over 75 years, we’ve designed, manufactured, and integrated optical components and systems for some of the world’s most demanding applications, from the bottom of our oceans to outer space. Our expertise spans acousto-optics, electro-optics, fiber optics, and precision optics, brought together through our global, vertically integrated manufacturing capability that includes crystal growth, fabrication, super polish, thin-film coatings, and complex clean room assembly and test. With operations across the U.K. and the United States, we continue to invest in our facilities and our capabilities, strengthening how we support customers within region and globally. Our technologies support innovation across industrial, semiconductor, aviation, space, and defense, as well as life sciences markets, where the highest levels of precision and mission-critical reliability are essential.

What sets G&H apart is our ability to move from component level innovation to fully integrated systems, working in partnership with our customers to deliver performance where it matters most. We combine a proud heritage of world-beating optical solutions expertise and proactive investment to help our customers solve the most complex photonics challenges today and into the future. Turning to slide four. During the first half of the financial year, we made further positive progress implementing the changes required across the business to support the group’s margin growth plans. I’m pleased to be able to report on the strong performance that was achieved in H1 against a challenging macroeconomic background. This is a testament to the progress the group is making, delivering our strategy and the resilience and depth of experience across our leadership team in navigating complex market dynamics.

I would like to take this opportunity to thank our many valued customers and strategic suppliers for their continued and growing confidence in G&H. I would also like to extend my sincere thanks and recognition to all of G&H’s employees around the world for their hard work during the first half of the year. It is a privilege to lead such a talented workforce who remain committed to delivering our customer-focused strategy during a period of continual global challenges, many of which are unpredictable and require constant vigilance, speed, and agility to address. As reported in our trading update at the beginning of April, demand from the group’s aerospace and defense customers continued to be strong in H1. At the same time, our industrial market showed encouraging signs that the recovery in semiconductor is now underway.

Whilst we experienced several challenges in parts of our life sciences business, we expect to see activity normalize in this market. Revenues for the first half of the year increased by 15.5% to GBP 81.9 million, compared to GBP 70.9 million in the prior period. We will take you through the performance by market sector in more detail later in the presentation. Adjusted operating profit for the period increased by 16.9% to GBP 7.2 million, compared to GBP 6.2 million in the first half of the prior year. Following the acquisitions of Phoenix Optical and Global Photonics last financial year, I can report that the integration of these businesses is now largely complete. Commercial synergies are being realized, and we are focused on expanding capacity at both of these sites to support the significant increase in demand that we are experiencing, especially from our aerospace and defense customers in Europe and North America.

The order book continues to increase and provide stronger visibility for the group, up to GBP 167.3 million at the end of March, compared to GBP 142.4 million at the end of the year and GBP 121.5 million at the same time in the prior year. G&H generated net cash from operations of GBP 3.9 million, compared to GBP 2.6 million in the same period of 2025. Reflecting the strategic investments made by the group, net debt increased to GBP 36.6 million, compared to GBP 29.9 million at the prior year-end, with a leverage ratio of 1.5 times. Our expectations for the group’s full-year performance remain unchanged. Although due to continuing macro and geopolitical uncertainty, near-term execution risks remain. G&H has strong prospects for profitable growth in the coming years, supported by the progress we’re making to accelerate the delivery of our strategy and underpinned by positive end market tailwinds for our technologies and capabilities.

I will now pass you over to James to take you through the financial results for the first half of 2026 in more detail.

James Corte, Chief Financial Officer, Gooch & Housego PLC: Thank you, Charlie, and good morning, everyone. As this is my first opportunity to present G&H’s results, I’d like to start by saying how thrilled I am to have joined such a high-quality business with unique technology, differentiated capabilities, and clear momentum in a number of very attractive end markets. From my first impressions, there is a lot to get stuck into, and I’m excited for the future of the group. Turning to slide six, the group financial performance. As Charlie highlighted earlier, the group delivered a strong first half performance. Organic revenue growth of 9.1% at constant currency was driven by excellent momentum in our aerospace and defense segment, with industrial and life science markets broadly flat. The reported growth of 15.5% shows the acceleration in aerospace and defense from the Global Photonics and Phoenix acquisitions.

Gross margins decreased by 100 basis points to 29.4% as continued operational improvements were offset by a number of mixed headwinds in our fiber optics and life science businesses, combined with continued supply shortages of key materials, notably germanium. We continued to invest in innovation with R&D spend increasing by GBP 400,000 to GBP 3.9 million. Development remains focused on our six vital few R&D work streams, and progress in these areas has been positive. We’ve invested in engineering resource where necessary and continue to expect these projects to generate in excess of GBP 50 million of margin-accretive revenue in the medium term. Adjusted operating profit margin increased by 10 basis points, reflecting the leverage effect of higher volume. After the impact of slightly higher finance charges following the recent acquisitions, this drives a strong increase in adjusted profit before tax, growing 13.9% compared with H1 2025.

This resulted in adjusted profits before tax of GBP 5.8 million, with adjusted basic earnings per share up GBP 0.014 at GBP 0.164. Our adj