Gooch & Housego Full Year Trading Update Shows Resilience and Growth

Aerospace & Defence: strong demand meets added capacity

Aerospace & Defence delivered further revenue growth in H2, driven by strong demand for precision optics and advanced sighting and imaging systems on military platforms. Commercial aerospace remains supportive too, with healthy demand for ring laser gyro components.

Operational improvements and extra capacity added over the last couple of years are paying off here. This is the engine room of growth right now and looks set to stay that way into FY26.

Acquisitions: Phoenix Optical and Global Photonics add US horsepower

Integration is “proceeding to plan” for both Phoenix Optical and Global Photonics, acquired during FY25. The strategy is about speed to value within Aerospace & Defence, and there are already tangible signs:

• Phoenix integration is focused on germanium fabrication, with combined substrate and coating offerings now available to customers.
• Global Photonics adds cleanroom lithography, photolithographic reticle fabrication, ion beam etching and advanced thin film coatings. The Tampa facility has significant space to scale.
• Crucially, Global Photonics strengthens relationships with US defence prime contractors, particularly for laser protection filtering, periscopes and complex optical systems.

Customer feedback has been positive, and G&H is pursuing a number of new opportunities. If these convert, they should underpin the order book and mix in FY26.

Order book builds, but debt steps up with investment

The order book continues to trend up and provides useful visibility for the new year. Over 80% of it is for delivery in FY26, including the full-year impact of the acquisitions.

Net bank debt (excluding IFRS 16 leases) has increased, reflecting acquisitions and investment in inventory alongside solid underlying cash generation before non-underlying items. That is a deliberate choice to support delivery and growth, but it will put a spotlight on cash conversion in FY26.

Key numbers	FY25	Comparatives
Order book (30 Sep 2025)	£142.3m	£121.5m (31 Mar 2025); £104.5m (30 Sep 2024)
Net bank debt excl. IFRS 16 (30 Sep 2025)	£30.0m	£24.1m (31 Mar 2025); £16.0m (30 Sep 2024)
FY25 revenues	Broadly in line with expectations	Board expectations not disclosed
FY25 adjusted PBT	Broadly in line with expectations	Board expectations not disclosed
Delivery profile	Over 80% of order book for FY26	–
Results date	2 December 2025	–

Margins and accounting: a couple of nuances to watch

Management highlights operational improvements, proactive supply chain handling, targeted investment to enhance capability, and the capitalisation of overheads in inventory. Capitalising overheads means some production costs are carried on the balance sheet as inventory rather than expensed immediately, which can flatter near-term margins but reverses when the inventory is sold.

Non-underlying costs are set to be “moderately higher” due to acquisitions and restructuring. Adjusted PBT excludes such non-underlying items as well as amortisation of acquired intangibles and impairments. The underlying operational progress looks genuine, but the statutory P&L will carry more one-offs in FY25.

Outlook: A&D strength offsets subdued Industrial and Life Sciences

The order book and recent acquisitions underpin increased trading in FY26, partially offset by higher overheads. Aerospace & Defence demand is described as strong across the UK, USA and Europe. Industrial and Life Sciences face a subdued near-term outlook, with recovery timing uncertain due to supply chain and tariff challenges.

Semiconductors are showing early green shoots, with management expecting modest growth in the medium term. Given photonics is a key enabler in advanced semiconductor equipment, that could provide a useful tailwind if it broadens out in calendar 2026.

Why this update matters for investors

• Visibility is improving: a £142.3m order book with more than 80% scheduled for FY26 gives confidence on revenue flow.
• Mix is skewing to defence: high margin, high spec work in Aerospace & Defence is growing, amplified by US capability and customer access via Global Photonics.
• Cash discipline will be key: net debt has stepped up to £30.0m as G&H invested in inventory and deals. Strong cash generation in FY26 would de-risk the balance sheet.
• Industrial recovery optionality: subsea is offsetting laser softness now, with semis offering medium-term upside if the recovery sticks.
• Product strategy is evolving: the last time buy on Pockels Cells clears the decks in Cleveland for scaling crystal capacity used internally and for external customers.

Risks and watchouts

• Short-term demand uncertainty in Industrial and Life Sciences could linger longer than hoped if supply chain or tariff issues persist.
• Higher non-underlying costs will weigh on statutory earnings in FY25, even as adjusted profit holds in line.
• Integration risk: execution on Phoenix and especially the scale-up at Tampa will need tight delivery to capture the US defence opportunity.
• Inventory and capitalised overheads will need careful management to protect cash and margin quality.

What I will look for on 2 December

• Adjusted vs statutory PBT and a clear bridge showing non-underlying costs.
• Gross margin trends by segment, particularly Aerospace & Defence.
• Cash conversion, working capital movements and inventory levels.
• Net debt trajectory and any guidance on deleveraging in FY26.
• Order intake in Q4 and early Q1 FY26, plus any colour on US defence pipeline wins.

Bottom line: resilient, defence-led and building for FY26

This is a reassuring update. G&H delivered steady trading, expanded its order book, and is leaning into Aerospace & Defence with two well-targeted acquisitions. The price is higher non-underlying costs and a step up in net debt, but the strategic direction looks sound and supported by growing demand where it matters.

If the Industrial and Life Sciences recovery emerges through FY26 and semiconductor demand improves as expected, the company should have multiple levers for growth. For now, defence strength and order book visibility do the heavy lifting.