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Gooch & Housego slides as it blames sluggish industrial laser demand for profit slump

The drop in laser demand, caused by the US-China trade war, was previously flagged in a June profit warning

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Gooch & Housego PLC (LON:GHH) shares were on the slide on Tuesday as it blamed a “challenging macro-economic-environment for industrial lasers” for a slump in full-year profits.

For the year ended 30 September, the maker of lenses, mirrors and fibre optic components reported an adjusted pre-tax profit of £15mln, down 19.9% on the prior year, while revenues rose 3.4% to £129.1mln.

READ: Gooch & Housego drops as it warns on profits with laser demand hit by China-US trade war

The sluggish performance for industrial lasers had offset what the company said was “record demand” for its fibre optics products, which are used in undersea cables and life science products.

GHH warned in June that the drop in demand for its lasers, caused by the ongoing US-China trade war, would hit its full-year profits.

However, despite the fall in profits, the firm’s total dividend for the year was increased to 11.5p per share from 11.3p.

The order book at the end of the period was £94.4mln, down 1.8% year-on-year, which was also attributed to the slowdown in laser demand despite a stronger performance for fibre optics.

Looking ahead, the company said while the laser market was currently downbeat, it expects innovation in the market and new manufacturing techniques to “drive improved demand” for its laser products going forward.

Mark Webster, the firm’s chief executive, added that its forecasts and plans were “not dependent on an industrial laser recovery” and that the group is “well positioned to deliver progress in [the 2020 financial year] and beyond".

Analysts at GHH’s house broker finnCap said the results were “in line with expectations” and maintained their price target of 1,250p.

The broker added that while demand for the company’s microelectronics was still “affected by the slow-down in China and US/Chinese trade issues”, the shares continued to “look up with events” with any news on Chinese trade talks likely to act as a catalyst for improved performance.

GHH shares dropped 4.6% to 1,195p in early deals.

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Quick facts: Gooch & Housego

Price: 1112.5 GBX

AIM:GHH
Market: AIM
Market Cap: £278.58 m
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