2024 Interim Report

Charlie Peppiatt,

Chief Executive Officer, commented:

Despite the reduced demand in industrial and medical laser markets persisting longer than

medium term outlook positive underpinned by a order book and healthy the Group well positioned from increased demand result of operational chain

"The market technologies strong in all supported the Group the

our strategy."

4-31

Performance

Overview

Revenue from the Group's continuing operations for the six-month period totalled £63.6m (2023: £64.5m) representing a 1.4% decline over the strong prior year comparator period, or 5.3% on an organic, constant currency basis. The Group's trading in the first half of the financial year was impacted by the previously reported significant destocking on the part of many of our industrial and medical laser customers. We expect volumes to recover in the early part of FY2025.

The Group completed the divestment of its EM4 business towards the end of the reporting period. The EM4 business manufactured optoelectronic components and laser modules primarily for the US A&D market. Its sale was an important step on the Group's journey to delivering sustainable margin growth and to consolidating our A&D activities into areas where we can offer differentiated products to our customers.

Our six-month financial results and those for the comparative periods have been presented as continuing operations, excluding the results of the divested business. Continuing operations include the results of GS Optics and Artemis Optical which were both acquired in the second half of the last financial year. We have, therefore, also disclosed the organic revenue performance of the Group where appropriate to enable like for like comparison to the prior period.

In the first half of the financial year revenue in to our Industrial market declined by 13.1%. As previously reported, this was driven by a reduction in demand from our Industrial laser customers who are correcting their inventory levels as well as from some of our semiconductor equipment customers. Volumes declined in to the more established areas of the semiconductor infrastructure market although there was growth in our revenue from the more advanced deep and

extreme ultra violet lithography equipment sub market. We expect deliveries into these next generation semiconductor platforms to continue to grow in the coming reporting periods. Revenue in the comparator period had been partially supported by the Group's work to reduce its levels of past due backlog, activity which had been substantially completed by the end of the last financial year.

Partially offsetting the reductions in semiconductors and industrial lasers, revenue in our telecoms markets and in particular the subsea data cable market grew. We are seeing additional demand from one of our long standing customers in this market space as they win new cable laying projects and we were pleased to secure an important new customer in this market. Deliveries to this new customer for a complex fibre optic module are expected to commence in the second half of this financial year. These modules will be built in our Torquay facility and in order to provide the production space needed for this new product line we are continuing to outsource production of our hi-reliability fused couplers to our Asian contract manufacturing partner.

In our Life Sciences market some of our larger medical laser customers are also working to reduce their inventory holdings and consequently Group revenue from these customers declined compared to the prior period. However, revenues into the medical diagnostic market grew thanks to two significant diagnostic instrument programmes progressing through regulatory approvals into volume production. End demand for our customers' new instruments is reported to be strong and we, therefore, expect these programmes to provide good revenue streams for the Group through the medium term.

Our engineering team in Ashford is developing and assisting with the accreditation of other customers' diagnostic instruments which we expect to also migrate in to production in the medium term. At the same time the Group has substantially completed the build out of additional R&D and production space in the recently acquired GS Optics business in Rochester, NY, which will form our Life Sciences centre of excellence for the North American market, mirroring the capabilities that we currently offer from our G&H|ITL facility in Ashford, Kent. This new facility has already secured ISO 13485 medical device manufacture accreditation. We expect this to allow us to secure better access to the large North American medical diagnostic market.

In our Aerospace & Defence market we saw strong growth in demand for our precision optic components that are used in ring laser gyros in both commercial and military guidance systems. This is driven by increased military spending in