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RNS
Goodwin PLC  -  GDWN   

Preliminary Results

Released 08:10 26-Jul-2018

RNS Number : 8454V
Goodwin PLC
26 July 2018
 

PRELIMINARY ANNOUNCMENT

 

 

 

Goodwin PLC today announces its preliminary results for the year ended 30th April 2018.

 

 

 

CHAIRMAN'S STATEMENT

 

We are pleased to report a 44% increase in pre-tax profits to £13.30 million (2017: £9.24 million) on revenues of £125 million (2017: £132 million). The Directors propose an increased dividend of 83.473p (2017: 42.348p) for the reasons outlined under the heading 'Changes to Dividend Policy' in the text below.

 

The Refractory Division's trading profits have risen from £4.2 million at April 2016 to £7.5 million at April 2018, excluding its sale of land in India which realised an additional £1.6 million of pre-tax profit. The success of our Indian operations has meant that for some time we have been operating out of much larger, bespoke built, freehold premises and during the year the right opportunity arose for us to dispose of our redundant original freehold investment in the country. Without the land sale, the Group pre-tax profits have risen 26% year on year and with the land sale included there has been a 44% increase in the reported Group pre-tax profits.  Again excluding the land sale, the Refractory Division's growth in pre-tax profits over the past two years equates to a compound growth rate of 34% per annum and has been most welcome at a time when capital expenditure in the oil and gas industry has been so constricted. The ten refractory engineering companies of which seven are overseas in India, China, Thailand and Brazil have the benefit of seeing much higher in-country GDP growth each year than is experienced in Europe and the USA.

 

Our Refractory Engineering Division increased its contribution to Group performance by achieving an average increase in turnover last financial year of 12% and an increase in trading profitability of 27%. This was assisted by the demise of our historic jewellery investment casting moulding powder competitor Kerr who had been the global leader in the period 1960 to 2000 but last year ceased trading jewellery investment casting powders. Whilst the diversification of the Group makes it harder to manage, it does permit the Group to avoid massive performance troughs such as could have been caused by the oil and gas industry decline over the past three and a half years.

 

In the Mechanical Engineering Division we are pleased to report that our three largest engineering companies - Goodwin International Ltd., Noreva GmbH and Goodwin Steel Castings Ltd. - through their focussed efforts over the past four years are now being rewarded with substantial orders that are coming from areas other than oil and gas, which will improve the Group's profitability in this new financial year.

 

When the oil and gas industry starts re-investing and the mining industry does likewise especially in copper production due to the need for the installation of electric car charging points worldwide, we would expect the profit generation of the Mechanical Engineering Division and the Refractory Division to remain around 50%/50% over the next two years with growth in profitability in both divisions.

A further point of interest is that for the first time ever the pre tax profits from our overseas companies (excluding the land sale) equalled those from our UK companies. Going forward as the oil and gas markets recover, we would expect this to move towards 60% of profits arising from our UK trading companies and 40% coming from our overseas companies.

 

It would be inappropriate not to make mention of how very difficult the last two financial years have been for the foundry, Goodwin Steel Castings. Indeed for all foundries worldwide other than those addressing the automotive industry and the aerospace industry, it has been a very challenging three years. Many foundries worldwide have either closed or merged in this period.

 

At Goodwin we have taken the opportunity over the past eighteen months to reposition the foundry such that we can address more efficiently very large high integrity castings for nuclear fuel reprocessing and for military boat building programmes in the USA, the UK and other overseas countries.

 

This investment in larger and more sophisticated plant combined with the design and manufacture of high performance materials during this very quiet period simply would not have been possible if the foundry had been as busy as it had been for the prior profitable twenty years.

 

As an indication that this decision to invest in the foundry was justified, we are pleased to announce that in June 2018, Goodwin Steel Castings won a contract for castings to be cast over the next four years for the US Navy at a value of $19.5 million. We expect this contract to be the first of many going forward for the specialized steel that is required and that Goodwin over a four year period obtained US Navy approval to manufacture last financial year.

 

Easat Radar Systems similarly had a very difficult year last financial year with project delays associated with contract changes to the scope of work, but again Easat has won a major programme for sixteen primary radar antennas for civilian airports. There is also another significant military programme that will likely be won in the next twelve months.

 

The Company's business metabolism is divided between growth, maintenance and investment in innovation.

 

Growth this year, compared to last, is 44% on profit, gross profit margin from 25.6% to 28.6%, return on capital employed from 8.4% to 12.3%, cash generation as net cash flow from operating activities from £5.285 million to £31.099 million and order input to individual companies from £138 million to £150 million.

 

Maintenance can be described as a decrease in gearing from 31% to 11%, intangible fixed assets increased from £18.2 million to £21.1 million, fixed assets additions per year up from £7.6 million to £9.4 million, net debt down from £28 million to £11million, return on investment up from 6.8% to 8.5%.

 

Our investment in innovation can be described in terms of people, products and markets. Sales per employee increased from £114,000 to £120,000 and we have a high percentage of employees (45%) in the 22 to 40 age range reflecting more apprentices having graduated and continuing to do so. We have travelled to 26 countries to obtain new business mostly outside of Europe. Much effort has been put into gaining new approvals for products, the manufacturing of which has started thanks to the past years' research and development and capital investment.  Investor valuation of these new products will in time be determined by the financial results but assessing the potential market size and competitiveness combined with their intellectual property rights and the employee skill base shown on our websites gives a current view of the potential.   US Energy Information Administration has forecast world energy demand will increase from 2015 to 2040 by 28%. Our axial valve and radar developments, our high integrity alloy castings for defence and civil nuclear together with refractories to tackle lithium battery fires remain works in progress that are part of our investment for the future.

 

The capital expenditure within the oil and gas industry in the financial year just completed has remained low as the major oil and gas companies have been rebuilding their balance sheets with the price of oil now between US$70 and US$80 per barrel. With energy consumption rising at 2.3 % per year and the oil surpluses having virtually disappeared, it is now possible that the activity in the oil, gas and LNG markets will start increasing in early 2019 rather than 2020 as we had earlier thought. We are well placed to take advantage of any increase in demand from these markets.

 

In our last year's Annual Report Statement and at the interim half year report, mention was made of substantial effort being made to improve the cash flow. We are pleased to say that as at the 30th April 2018, the Group cash flow has improved by £17 million over the past twelve months and this is after paying the dividend, corporation tax and some £9 million of capital investment.

 

Whilst all companies have focused on improving their cash flow, one must remember that the pre-tax profit reported of £13.30 million is after having deducted non cash charges of £6.4 million for depreciation/amortisation adjustments. The Group gearing as at the 30th April 2018 was just 11%. It is for this reason and with our vision for the future that the Board feels confident that the alteration of the dividend policy is safe and viable now and going forward.

 

We would like to take the opportunity of thanking all our employees, managers and Directors both in the UK and overseas for working so hard to achieve these improved trading results which it is likely will improve again in the new financial year, especially so as the order intake as we write is 16% increased as compared to the same time last year.

 

 

 

 

 

26th July, 2018

J.W. Goodwin

 

Chairman

 

 

 

Alternative performance measures mentioned above are defined in note 6.
 

 

 

 

OBJECTIVES, STRATEGY AND BUSINESS MODEL

 

The Group's main OBJECTIVE is to have a sustainable long-term engineering based business with good potential for profitable growth while providing a fair return to our shareholders.

 

The Board's STRATEGY to achieve this is:

 

·   to supply a range of technically advanced products to growth markets in the mechanical engineering and refractory engineering segments in which we have built up a global reputation for engineering excellence, quality, efficiency, reliability, price and delivery;

·   to manufacture advanced technical products profitably, efficiently and economically;

·   to maintain an ongoing programme of investment in plant, facilities, sales and marketing, research and development with a view to increasing efficiency, reducing costs, increasing performance, delivering better products for our customers, expanding our global customer base and keeping us at the forefront of technology within our markets, whilst at all times taking appropriate steps to ensure the health and safety of our employees and customers;

·   to control our working capital and investment programme to ensure a safe level of gearing;

·   to maintain a strong capital base to retain investor, customer, creditor and market confidence and so help sustain future development of the business;

·   to support a local presence and a local workforce in order to stay close to our customers;

·   to invest in training and development of skills for the Group's future.

 

 

 

BUSINESS MODEL

 

The Group's focus is on manufacturing within two sectors, mechanical engineering and refractory engineering, and through this division of our manufacturing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk/2018

 

 

Mechanical Engineering

 

The Group designs, manufactures and sells a wide range of dual plate valves, axial nozzle check valves and axial piston control and isolation valves to serve the oil, petrochemical, gas, LNG and water markets. We generate value by creating leading edge technology designs, globally sourcing the best quality raw material at good prices, manufacturing in highly efficient facilities using up to date technology to provide very reliable products to the required specification, at competitive prices and with timely deliveries.

 

Our mechanical engineering markets also include high alloy castings, machining and general engineering products which typically form part of large construction projects such as power generation plants, oil refineries, high integrity offshore structural components and bridges. The Group through its foundry, Goodwin Steel Castings, has the capability to pour high performance alloy castings up to 35 tonnes, radiograph and also finish CNC machine and fabricate them at the foundry's sister company, Goodwin International. This capability is targeting the defence industry and nuclear fuel processing as well as the oil and gas industry. 

 

Goodwin International, the largest company in the mechanical engineering division, designs and manufactures dual plate, axial nozzle valves and axial piston valves and also undertakes specialised CNC machining and fabrication work. Goodwin International also has a division that is focussed on manufacturing / machining high precision, high integrity components that are utilised in nuclear propulsion systems and nuclear fuel reprocessing and handling systems. Noreva GmbH also designs, manufactures and sells axial nozzle valves. Both Goodwin International and Noreva purchase the majority of the value of their sand mould castings from Goodwin Steel Castings and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries.

 

At Goodwin Pumps India we manufacture a superior range of submersible slurry pumps for end users in India, China, Brazil, Australia and Africa. Easat Radar Systems designs and builds bespoke high-performance radar antenna systems for the global market of major defence contractors, civil aviation authorities and border security agencies. We create value on these by innovative design, assembly and testing in our own facilities using bought in or engineered in-house components.

 

 

Refractory Engineering

                                                                                                                                                                         

Within the refractory engineering division, Goodwin Refractory Services (GRS) primarily generates gross margin from designing, manufacturing and selling investment casting powders and waxes to the jewellery casting industry. GRS also manufactures and sells investment casting powders to the tyre mould and aerospace industries. The refractory division has eight other investment powder manufacturing companies located in China, India, Thailand and Brazil which sell the casting powders directly and through distributors to the jewellery casting industry.

 

These companies are vertically integrated with another of our UK companies, Hoben International, which manufactures cristobalite which it sells to the nine casting powder manufacturing companies as well as producing ground silica that also goes into casting powders. Hoben International now also manufactures different grades of perlite.

 

The other UK refractory company is Dupré Minerals which focuses on producing exfoliated vermiculite that is used in insulation, brake linings and fire protection products, including technical textiles that can withstand exposure to high temperatures and for lithium battery fire extinguishers. Dupré also sells consumable refractories to the shell moulding casting industry.

 

 

 

Changes to Dividend Policy

 

 

The Directors have been analysing the current and historic business performance and whilst over the prior three years to the financial year that has just been completed there had been a fall off in Group profitability associated with the vast contraction in capital expenditure in the oil, gas and mining markets we consider this is only temporary.

 

Twenty five years ago in 1992, the majority of Group sales were associated with products made under licence for which our manufacturing companies paid licence fees to our licensors and our sales territory was limited to Europe in the main by our licensors. By the mid 1990s Goodwin had designed and developed our own range of products that were technically and commercially competitive, many of which we patented and that our Group companies could sell world wide, especially to the developing markets where annual growth rates of GDP were very much higher than Europe.

 

In the 1980s and early 1990s much of our trading profit was repatriated to our licensors as licence fees. Since the mid 1990s the Group has not manufactured and sold products under licence. Now with a global sales activity, we have in comparison to former years saved significant amounts of cash and increased profits as we no longer pay these manufacturing licence fees. Also since the mid 1990s the Group spent considerable money in developing our global sales network, especially in the Pacific Basin, and also started undertaking large engineering projects.

 

The transformation described above applies to Goodwin International, Goodwin Steel Castings, Goodwin Refractory Services and Noreva GmbH, all of whom have a number of patents. Easat Radar Systems has also benefitted from the process.

 

Today the Group primarily manufactures its own products that it sells direct to market in 96 different countries.

 

In the early 1980s following Goodwin having extracted itself from profitably making radial tyre building machinery when there was a permanent drop in consumption of tyres per car associated with the radial tyre that lasted twice as long as the cross ply tyre, Goodwin started making pumps and valves under licences from two USA companies. Between the early 1980s to the mid 1990s when Goodwin made pumps and valves under USA licences Goodwin struggled to make significant profits due to the licence fees paid on the then new products - pumps and valves which we manufactured and sold into competitive markets.

 

For the past twenty years the Group has made significant profits that grew at the rate of about 20% per year compound (except in the three years prior to the financial year just completed due to the recent oil and gas industry contraction). The majority of these profits made in this 20 year period, more than 75% after paying tax, had been reinvested into designing and developing new products and expanding our global markets for our mechanical and refractory engineering companies. Money was also spent on buying high efficiency and technologically advanced manufacturing plant and machinery, training our people, setting up overseas sales organisations and companies and/or in buying complementary or competitive companies.

For our major product ranges whether it be dual plate check valves, nozzle valves, axial piston valves, radar antenna systems, high integrity alloy castings, investment casting powders, vermiculite products, cristobalite, our product offerings are now in the top three in the world and most are number one.

 

It is for this reason and having re-invested over £130 million pounds of our post-tax profits in the subsidiary companies and on acquisitions over the past twenty years, the company is in a more robust state. 

 

The Board has now concluded that it is appropriate to modify the dividend policy going forward until further notice. Historically averaging it over the past twenty years, the dividend, as a percentage of post-tax profits plus depreciation and amortisation, has been 20%, it is now planned to increase this figure to 38% starting for the year just completed subject to shareholders voting in favour of this at the AGM on 3rd October 2018.

 

Conversely our investment into designing and developing new products for our mechanical and refractory engineering companies, buying high efficiency and technologically advanced manufacturing plant and machinery,  setting up overseas sales organisations and companies and/or in buying complementary or competitive companies which has cost on average 70% of post-tax profits plus depreciation and amortisation over the past twenty years, we plan to limit this activity to a maximum on a three year rolling annual average of 55% of post-tax profits plus depreciation and amortisation.

 

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 30th April, 2018

 

 

 

2018

2017

 

 

£'000

£'000

CONTINUING OPERATIONS

 

 

 

Revenue

 

124,811

131,587

Cost of sales

 

(89,143)

(97,836)

 

 

                 

                 

GROSS PROFIT

 

35,668

33,751

Distribution expenses

 

(3,359)

(3,486)

Administrative expenses

 

(18,729)

(20,317)

 

 

                 

                 

OPERATING PROFIT

 

13,580

9,948

Financial expenses

 

(590)

(873)

Share of profit of associate companies

 

310

169

 

 

                 

                 

PROFIT BEFORE TAXATION

 

13,300

9,244

Tax on profit

 

(3,865)

(2,487)

 

 

                 

                 

PROFIT AFTER TAXATION

 

9,435

6,757

 

 

                 

                 

ATTRIBUTABLE TO:

 

 

 

Equity holders of the parent

 

8,504

6,082

Non-controlling interests

 

931

675

 

 

                 

                 

PROFIT FOR THE YEAR

 

9,435

6,757

 

 

                 

                 

 

 

 

 

BASIC AND DILUTED EARNINGS PER ORDINARY SHARE

 

118.11p

84.47p

 

 

                 

                 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30th April, 2018

 

 

2018

2017

 

£'000

£'000

PROFIT FOR THE YEAR

9,435

6,757

 

 

 

OTHER COMPREHENSIVE INCOME / (EXPENSE)

 

 

ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO THE INCOME STATEMENT:

 

 

Foreign exchange translation differences

(152)

3,619

Effective portion of changes in fair value of cash flow hedges

(294)

(6,526)

Change in fair value of cash flow hedges transferred to the

income statement

5,108

2,142

Tax charge on items that may be reclassified subsequently to the

income statement

(818)

738

 

                 

                 

OTHER COMPREHENSIVE INCOME /(EXPENSE) FOR THE YEAR, NET OF INCOME TAX

3,844

(27)

 

                 

                 

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

13,279

6,730

 

                 

                 

ATTRIBUTABLE TO:

 

 

Equity holders of the parent

12,245

5,654

Non-controlling interests

1,034

1,076

 

                 

                 

 

13,279

6,730

 

                 

                 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th April, 2018

 

Share capital

Translation reserve

Cash flow hedge reserve

Share-based payments reserve

Retained earnings

Total attributable to equity holders of the parent

Non-controlling interests

Total equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

YEAR ENDED 30TH APRIL, 2018

 

 

 

 

 

 

 

 

Balance at 1st May, 2017

720

2,154

(4,240)

601

90,201

89,436

4,225

93,661

Total comprehensive income:

 

 

 

 

 

 

 

 

Profit

-

-

-

-

8,504

8,504

931

9,435

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign exchange translation differences

-

(275)

-

-

-

(275)

123

(152)

Net movements on cash flow hedges

-

-

4,016

-

-

4,016

(20)

3,996

 

                 

                 

                 

                 

                 

                 

                 

                 

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

-

(275)

4,016

-

8,504

12,245

1,034

13,279

Equity-settled share-based payment transactions

-

-

-

1,024

-

1,024

-

1,024

Dividends paid

-

-

-

-

(3,137)

(3,137)

-

(3,137)

 

                 

                 

                 

                 

                 

                 

                 

                 

BALANCE AT 30TH APRIL, 2018

720

1,879

(224)

1,625

95,568

99,568

5,259

104,827

 

                 

                 

                 

                 

                 

                 

                 

                 

YEAR ENDED 30TH APRIL, 2017

 

 

 

 

 

 

 

 

Balance at 1st May, 2016

720

(1,041)

(594)

-

87,209

86,294

3,823

90,117

Total comprehensive income:

 

 

 

 

 

 

 

 

Profit

-

-

-

-

6,082

6,082

675

6,757

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign exchange translation differences

-

3,218

-

-

-

3,218

401

3,619

Net movements on cash flow hedges

-

-

(3,646)

-

-

(3,646)

-

(3,646)

 

                 

                 

                 

                 

                 

                 

                 

                 

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

-

3,218

(3,646)

-

6,082

5,654

1,076

6,730

Transactions with owners of the Company recognised directly in equity

-

(23)

-

 

21

(2)

1

(1)

Equity-settled share-based payment transactions

-

-

-

601

-

601

-

601

Dividends paid

-

-

-

-

(3,111)

(3,111)

(675)

(3,786)

 

                 

                 

                 

                 

                 

                 

                 

                 

BALANCE AT 30TH APRIL, 2017

720

2,154

(4,240)

601

90,201

89,436

4,225

93,661

 

                 

                 

                 

                 

                 

                 

                 

                 

 

 

CONSOLIDATED BALANCE SHEET

at 30th April, 2018

 

 

2018

2017

 

 

£'000

£'000

NON-CURRENT ASSETS

 

 

 

Property, plant and equipment

 

69,154

65,739

Investment in associates

 

1,963

2,045

Intangible assets

 

21,138

18,240

Trade and other receivables

 

728

-

 

 

                 

                 

 

 

92,983

86,024

 

 

                 

                 

CURRENT ASSETS

 

 

 

Inventories

 

28,850

37,657

Trade and other receivables

 

27,960

26,338

Derivative financial assets

 

364

1,756

Cash and cash equivalents

 

7,485

5,172

 

 

                 

                 

 

 

64,659

70,923

 

 

                 

                 

TOTAL ASSETS

 

157,642

156,947

 

 

                 

                 

CURRENT LIABILITIES

 

 

 

Interest-bearing loans and borrowings

 

12,468

9,542

Trade and other payables

 

26,891

22,454

Deferred consideration

 

500

500

Derivative financial liabilities

 

1,535

2,492

Liabilities for current tax

 

1,174

1,592

Warranty provision

 

184

90

 

 

                 

                 

 

 

42,752

36,670

 

 

                 

                 

NON-CURRENT LIABILITIES

 

 

 

Interest-bearing loans and borrowings

 

5,775

23,675

Warranty provision

 

329

305

Deferred tax liabilities

 

3,959

2,636

 

 

                 

                 

 

 

10,063

26,616

 

 

                 

                 

TOTAL LIABILITIES

 

52,815

63,286

 

 

                 

                 

NET ASSETS

 

104,827

93,661

 

 

                 

                 

 

 

 

 

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

 

 

Share capital

 

720

720

Translation reserve

 

1,879

2,154

Share-based payments reserve

 

1,625

601

Cash flow hedge reserve

 

(224)

(4,240)

Retained earnings

 

95,568

90,201

 

 

                 

                 

TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

99,568

89,436

NON-CONTROLLING INTERESTS

 

5,259

4,225

 

 

                 

                 

TOTAL EQUITY

 

104,827

93,661

 

 

                 

                 

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 30th April, 2018

 

2018

2018

2017

2017

 

£'000

£'000

£'000

£'000

CASH FLOW FROM OPERATING ACTIVTIES

 

 

 

 

Profit from continuing operations after tax

 

9,435

 

6,757

Adjustments for:

 

 

 

 

Depreciation

 

5,243

 

5,597

Amortisation of intangible assets

 

1,138

 

938

Financial expenses

 

590

 

873

Foreign exchange losses / (gains)

 

 

277

 

(696)

(Profit) / loss on sale of property, plant and equipment

 

(1,568)

 

52

Share of profit of associate companies

 

(310)

 

(169)

Equity-settled share-based provisions

 

1,024

 

601

Tax expense

 

3,865

 

2,487

 

 

                 

 

                 

OPERATING PROFIT BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS

 

19,694

 

16,440

(Increase) / decrease in trade and other receivables

 

(2,625)

 

8,721

Decrease / (increase) in inventories

 

8,801

 

(1,014)

Increase / (decrease) in trade and other payables (excluding payments on account)

 

2,213

 

(5,086)

Decrease / (increase) in cash flow hedge balances

 

5,249

 

(4,359)

Increase / (decrease) in payments on account

 

2,224

 

(5,825)

 

 

                 

 

                 

CASH GENERATED FROM OPERATIONS

 

35,556

 

8,877

Interest paid

 

(665)

 

(802)

Corporation tax paid

 

(3,703)

 

(2,675)

Interest element of finance lease obligations

 

(89)

 

(115)

 

 

                 

 

                 

NET CASH FROM OPERATING ACTIVITIES

 

31,099

 

5,285

 

 

 

 

 

 

 

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES

 

 

 

 

Proceeds from sale of property, plant and equipment

1,888

 

237

 

Acquisition of intangible assets

(378)

 

(149)

 

Acquisition of property, plant and equipment

(9,010)

 

(7,411)

 

Development expenditure capitalised

(3,334)

 

(791)

 

Dividends received from associate companies

441

 

-

 

 

                 

 

                 

 

NET CASH OUTFLOW FROM INVESTING ACTIVITIES

 

(10,393)

 

(8,114)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Payment of capital element of finance lease obligations

(865)

 

(930)

 

Dividends paid

(3,137)

 

(3,111)

 

Dividends paid to non-controlling interests

-

 

(675)

 

Proceeds from loans and committed facilities

-

 

5,871

 

Repayment of loans and committed facilities

(12,044)

 

(44)

 

 

                 

 

                 

 

NET CASH (OUTFLOW) / INFLOW FROM FINANCING ACTIVITIES

 

(16,046)

 

1,111

 

 

                 

 

                 

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS

 

4,660

 

(1,718)

Cash and cash equivalents at beginning of year

 

(1,483)

 

(413)

Effect of exchange rate fluctuations on cash held

 

(277)

 

648

 

 

                 

 

                 

CASH AND CASH EQUIVALENTS AT END OF YEAR

2,900

 

(1,483)

 

 

                 

 

                 

           

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Group's operations expose it to a variety of risks and uncertainties. These risks are no different to previous years and they are not expected to change substantially in the foreseeable future. The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The key risks are discussed below.

 

Market risk: The Group provides a range of products and services, and there is a risk that the demand for these products and services will vary from time to time because of competitor action or economic cycles or international trade friction or even wars.  As shown in note 2 to the financial statements, the Group operates across a range of geographical regions, and its turnover is split across the UK, Europe, USA, the Pacific Basin and the rest of the world.  This spread reduces risk in any one territory.  Similarly, the Group operates in both mechanical engineering and refractory engineering sectors, mitigating the risk of a downturn in any one product area as was seen over the past two financial years.  The potential risk of the loss of any key customer is limited as, typically, no single customer accounts for more than 10% of turnover. As described in the Business Model, the Group generates significant sales not only from the worldwide energy markets but also from nuclear propulsion systems, military ship building and the jewellery consumer market that our investment casting powder companies indirectly supply through the supply of investment casting moulding powders, waxes and silicone rubber. As we have recently seen in the oil, gas and metal/ore mining markets, these markets suffered short-term declines, but over the medium to long-term the growing worldwide demand for energy and metal especially copper will ensure these markets remain buoyant.

 

Technical risk: The Group develops and launches new products as part of its strategy to enhance the long-term value of the Group. Such development projects carry business risks, including reputational risk, abortive expenditure and potential customer claims which may have a material impact on the Group. The potential risk here is seen as manageable given the Group is developing products in areas in which it is knowledgeable and new products are tested prior to their release into the market.

 

Product failure/Contractual risk: The risks that the Group supplies products that fail or are not manufactured to specification are risks that all manufacturing companies are exposed to but we try to minimise these risks through the use of highly skilled personnel operating within robust quality control system environments, using third party accreditations where appropriate. With regard to the risk of failure in relation to  new products coming on line, the additional risks here are minimised at the research and development stage, where prototype testing and the deployment of a robust closed loop product performance quality control system provides feed back to the design department for the products we manufacture and sell. The risk of not meeting safety expectations, or causing significant adverse impacts to customers or the environment, is countered by the combination of the controls mentioned within this section and the purchase of product liability insurance. The risk of product obsolescence is countered by research and development investment.

 

Health and safety: The Group's operations involve the typical health and safety hazards inherent in manufacturing and business operations. The Group is subject to numerous laws and regulations relating to health and safety around the world. Hazards are managed by carrying out risk assessments and introducing appropriate controls, as well as attending safety training courses.

 

Acquisitions: The Group's growth plan over recent years has included a number of acquisitions. There is the risk that these, or future acquisitions, fail to provide the planned value. This risk is mitigated through financial and technical due diligence during the acquisition process and the Group's inherent knowledge of the markets they operate in.

 

Financial risk: The principal financial risks faced by the Group are changes in market prices (interest rates, foreign exchange rates and commodity prices). Detailed information on the financial risk management objectives and policies is set out in note 20  to the financial statements to be published shortly. The Group has in place risk management policies that seek to limit the adverse effects on the financial performance of the Group by using various instruments and techniques, including credit insurance, stage payments, forward foreign exchange contracts, secured and unsecured credit lines, and interest rate swaps.

 

Regulatory compliance: The Group's operations are subject to a wide range of laws and regulations. Both within Goodwin PLC and its subsidiaries, the Directors and Senior Managers within the companies make best endeavours to ensure we comply with the relevant laws and regulations.

 

Assessment of principal risks: Changes and likely impact: 

As part of the Board's risk management and control of principal risks, areas of monitoring and expert advice undertaken are reported upon by the Audit Committee in the Directors Report and Accounts to be published shortly. 

 

 

FORWARD-LOOKING STATEMENTS

 

The Group Strategic Report contains forward-looking type statements and information based on current expectations, and assumptions and forecasts made by the Group. These expectations and assumptions are subject to various known and unknown risks, uncertainties and other factors, which could lead to substantial differences between the actual future results, financial performance and the estimates and historical results given in this report. Many of these factors are outside the Group's control. The Group accepts no liability to publicly revise or update these forward-looking statements or adjust them for future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

 

 

Responsibility statement of the Directors in respect of the annual financial report

 

We confirm that to the best of our knowledge:

 

•   the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and

•   the Group Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

 

 

Board of Directors:

 

J. W. Goodwin, Chairman

R. S. Goodwin, Managing Director

J. Connolly, Director

M. S. Goodwin, Director

S. R. Goodwin, Director

S. C. Birks, Director

B. R. E. Goodwin, Director

T. J. W. Goodwin, Director

J.  E. Kelly, Non-Executive Director

 

 

Accounting policies

Goodwin PLC (the "Company") is incorporated in England and Wales.

 

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group") and equity account the Group's interest in associates. 

 

The Group's financial statements have been approved by the Directors and prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU).

 

The Accounting Policies are included in Note 1 of the Accounts to be published shortly.

 

New IFRS standards and interpretations adopted during 2018

 

In 2018 the following amendments had been endorsed by the EU, became effective and therefore were adopted by the Group:

·   Amendments to IAS 12 - Recognition of Deferred Tax Assets for unrealised losses (effective for annual periods beginning on or after 1st January, 2017)

·   Amendments to IAS 7 - Disclosure initiative (effective for annual periods beginning on or after 1st January, 2017)

·   Annual Improvements to IFRSs - 2014-2016 Cycle - minor amendments to IFRS 12 (effective for annual periods beginning on or after 1st January, 2017)

The adoption of these standards and amendments has not had a material impact on the Group's financial statements.

 

 

The financial information previously set out does not constitute the Company's statutory accounts for the years ended 30th April, 2018 or 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies, and those for 2018 will be delivered in due course. The auditors have reported on those accounts; their report was:

 

i.          unqualified;

ii.          did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and

iii.         did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

 

Copies of the 2018 accounts are expected to be posted to shareholders within the next three weeks and will also be available on the Company's website: www.goodwin.co.uk and from the Company's Registered Office:  Ivy House Foundry, Hanley, Stoke-on-Trent  ST1 3NR.

 

 

Note 1

 

Segmental Information

 

Products and services from which reportable segments derive their revenues

For the purposes of management reporting to the chief operating decision maker, the Board of Directors, the Group is organised into two reportable operating divisions: mechanical engineering and refractory engineering. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. In accordance with the requirements of IFRS 8 the Group's reportable segments, based on information reported to the Group's Board of Directors for the purposes of resource allocation and assessment of segment performance are as follows:

 

o Mechanical Engineering        - casting, valve, antenna and pump manufacture and general                                                                                                                                             engineering

o Refractory Engineering         - powder manufacture and mineral processing

 

Information regarding the Group's operating segments is reported below.  Associates are included in Refractory Engineering.

 

Revenue

Revenue from goods and services was £116,812,000 and revenue from construction contracts was £7,999,000.

 

 

 

Mechanical

Engineering

Refractory

Engineering

 

Sub Total

Year ended 30th April

2018

2017

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

 

 

 

 

 

 

External sales

80,661

91,335

44,150

40,252

124,811

131,587

Inter-segment sales

18,839

29,084

8,354

6,522

27,193

35,606

 

                 

                 

                 

                 

                 

                 

Total revenue

99,500

120,419

52,504

46,774

152,004

167,193

 

                 

                 

                 

                 

 

 

Reconciliation to consolidated revenue:

 

 

 

 

 

 

Inter-segment sales

 

 

 

 

(27,193)

(35,606)

 

 

 

 

 

                 

                 

Consolidated revenue for the  year

y

yyyearyear

 

 

 

 

124,811

131,587

year

 

 

 

 

                 

                 

 

 

 

Mechanical

Engineering

Refractory

Engineering

 

Sub Total

Year ended 30th April

2018

2017

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

£'000

£'000

Profits

 

 

 

 

 

 

Operating profit  including share of associates

8,282

6,982

9,130

5,933

17,412

12,915

 

                 

                 

                 

                 

 

 

% of  total operating profit  including share of associates

48%

54%

52%

46%

100%

100%

 

 

 

 

 

 

 

Group centre

 

 

 

 

(2,498)

(2,197)

LTIP - non cash provision

 

 

 

 

(1,024)

(601)

Group finance expenses

 

 

 

 

(590)

(873)

 

 

 

 

 

                 

                 

Consolidated profit before tax for the year

 

 

 

 

13,300

9,244

Tax

 

 

 

 

(3,865)

(2,487)

 

 

 

 

 

                 

                 

Consolidated profit after tax for the year

 

 

9,435

6,757

 

 

 

 

 

                 

                 

 

 

 

 

 

 

 

 

 

Segmental total assets

Segmental total liabilities

Segmental net assets

Year ended 30th April

2018

2017

2018

2017

2018

2017

 

£'000

£'000

£'000

£'000

£'000

£'000

Segmental net assets

 

 

 

 

 

 

Mechanical Engineering

79,835

80,968

50,113

65,036

29,722

15,932

Refractory Engineering

39,534

41,717

19,905

23,321

19,629

18,396

 

                 

                 

                 

                 

                 

                 

Sub total reportable segment

119,369

122,685

70,018

88,357

49,351

34,328

 

                 

                 

                 

                 

 

 

Goodwin PLC net assets

 

 

 

 

66,715

71,944

Elimination of Goodwin PLC investments

 

 

 

(20,950)

(22,084)

Goodwill

 

 

 

 

9,711

9,473

 

 

 

 

 

                 

                 

Consolidated total net  assets

 

 

 

104,827

93,661

 

 

 

 

 

                 

                 

 

 

 

Segmental property, plant and equipment (PPE) capital expenditure

 

 

 

 

 

2018

2017

 

 

 

 

 

£'000

£'000

 

 

 

 

 

 

 

Goodwin PLC

 

 

 

 

6,880

5,070

Mechanical Engineering

 

 

 

 

2,176

1,611

Refractory Engineering

 

 

 

 

360

918

 

 

 

 

 

                 

                 

 

 

 

 

 

9,416

7,599

 

 

 

 

 

                 

                 

 

 

 

 

 

 

 

Segmental depreciation, amortisation and impairment

 

 

 

 

 

2018

2017

 

 

 

 

 

£'000

£'000

 

 

 

 

 

 

 

Goodwin PLC

 

 

 

 

2,144

2,258

Mechanical Engineering

 

 

 

 

2,629

2,607

Refractory Engineering

 

 

 

 

1,608

1,670

 

 

 

 

 

                 

                 

 

 

 

 

 

6,381

6,535

 

 

 

 

 

 

 

 

 

For the purposes of monitoring segment performance and allocating resources between segments, the Group's Board of Directors monitors the tangible and financial assets attributable to each segment.  All assets and liabilities are allocated to reportable segments with the exception of those held by the parent Company, Goodwin PLC, and those held as consolidation adjustments.

 

Geographical segments

The Group operates in the following principal locations.

In presenting the information on geographical segments, revenue is based on the location of its customers and assets on the location of the assets.

 

 

Year ended 30th April, 2018

Year ended 30 April, 2017

 

Revenue

Operational net assets

Non-current assets

PPE Capital expenditure

Revenue

Operational net assets

Non-current assets

PPE Capital expenditure

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

UK

27,829

70,558

76,325

8,301

24,034

63,451

69,693

6,504

Rest of Europe

31,246

12,477

3,281

772

29,712

10,213

2,271

466

USA

3,742

-

-

-

6,574

-

-

-

Pacific Basin

23,052

14,785

8,003

154

33,095

14,012

7,459

210

Rest of World

38,942

7,007

5,374

189

38,172

5,985

6,601

419

                 

               

               

            

              

               

            

            

Total

124,811

104,827

 

92,983

9,416

131,587

93,661

86,024

7,599

                 

               

               

            

              

              

            

            

 

 

 

Note 2

 

Intangible Assets

 

 

During the year, the Group added to its portfolio of intangible assets. The main additions are £142,000 on the development of a new fire extinguisher project in Dupre Minerals, £270,000 on refractory development projects in Goodwin Refractory Services, £489,000 on the development of a new valve range by Goodwin International and £2,318,000 on the development of radar equipment within Easat Radar Systems and NRPL Aero.

 

 

Note 3

 

Dividends

The directors propose the payment of an ordinary dividend of 83.473p per share (2017: ordinary dividend of 42.348p).  If approved by shareholders, the ordinary dividend will be paid on 5th October, 2018 to shareholders on the register at the close of business on 7th September, 2018.

 

Note 4

 

Earnings per share

The earnings per ordinary share has been calculated on profit for the year attributable to ordinary shareholders of £8,504,000 (2017: £6,082,000) and by reference to the 7,200,000 ordinary shares in issue throughout both years.

 

There is a share option scheme in place for the Directors of the Company under the Company's Long Term Investment Plan (LTIP), based on the Company exceeding a target growth in the total shareholder return of the Company over the period from 1st May, 2016 to 30th April, 2019.  Under the LTIP, as at 30th April, 2018, there would be no share options accruing to the Directors under the LTIP and so there is no difference between the basic and fully diluted earnings per share of the Company in the current and prior year.

 

Note 5

 

Annual General Meeting

 

The Annual General Meeting will be held at 10.30 a.m. on 3rd October, 2018 at Crewe Hall, Weston Road, Crewe, Cheshire CW1 6UZ.

 

 

Note 6

 

Alternative Performance Measures

 

 

Measure

2018

2017

Operating profit (£'000)

13,580

9,948

Capital employed (£'000)

110,826

117,981

 

                 

                 

Return on capital employed (%)

12.3

8.4

 

 

 

 

                 

                 

Net debt (£'000)

11,258

28,545

Deferred consideration

500

500

 

                 

                 

Net debt excluding deferred consideration  (£'000)

10,758

28,045

 

 

 

Net assets attributable to equity holders of the parent(£'000

99,568

89,436

Gearing (%)

10.8

31.4

 

Net profit attributable to equity holders of the parent (£'000)

8,504

6,082

Net assets attributable to equity holders of the parent(£'000)

99,568

89,436

 

                 

                 

Return on investment (%)

8.5

6.8

 

 

 

 

 

                 

                 

Revenue (£'000)

124,811

131,587

Average number of employees

1,042

1,154

 

                 

                 

Sales per employee (£'000)

120

114

 

 

 

 

                 

                 

Refractory division - operating profit including share of associates (£'000)

9,130

5,933

Profit on sale of land

(1,606)

-

 

                 

                 

Refractory division trading profit (£'000)

7,524

5,933

 

 

 

 

                 

                 

Annual post tax profit (£'000)

9,435

6,757

Depreciation (£'000)

5,243

5,597

Amortisation (£'000)

1,138

938

 

                 

                 

 

 

 

Annual post tax profit before depreciation and amortisation (£'000)

15,816

 

 

 

13,292

 

       

          

 

               

 

END


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