Gooch & Housego

Gooch & Housego (G&H), the specialist maker of optical components and systems, has received upgrades from analysts following an unexpected, yet very upbeat trading update.

AIM-listed G&H, guided by physicist Gareth Jones, CEO, makes precision optical, crystal and optoelectronic components – the company is best known for dominating the market for Q-Switch devices – and supplies the world’s major optical and laser system manufacturers.

Encouragingly, the Somerset-based concern, which reported a 62% surge in operating profits to £2.6m for the half to March, has announced an ‘increase in management’s expectations’ for both sales and profits for the year to September. Enjoying sustained recovery in core markets and new business wins in aerospace and defence, G&H says it is benefiting from recent initiatives to increase manufacturing capacity and reduce leadtimes in order to meet strong demand levels. Tellingly, the G&H order book at the end of June stood at £22.1m, 11% north of the figure at the end of March.

In the wake of the pleasing missive, house broker Investec now forecasts turnover of £42.5m and £5.2m of pre-tax profit for September 2010, ahead of £46.2m sales and £6.5m PBT for 2011. Earnings per share are expected to swell from 18.1p this year to 22.2p next.

Enthusiastically recommended by Growth Company Investor recently at 211.5p, shares in the strongly cash-generative G&H offer exposure to some racy earnings growth and an eventual return to the dividend list and are still well worth buying and stashing away.