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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Goodwin | AQSE:GDWN.GB | Aquis Stock Exchange | Ordinary Share | GB0003781050 | Ordinary Shares 10p |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
236.00 | 2.90% | 8,386.00 | 8,000.00 | 8,500.00 | 8,386.00 | 8,150.00 | 8,150.00 | 100 | 09:20:17 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMGDWN
RNS Number : 2296I
Goodwin PLC
11 August 2021
PRELIMINARY ANNOUNCEMENT
Goodwin PLC today announces its preliminary results for the year ended 30th April 20201.
CHAIRMAN'S STATEMENT
The pre-tax profit for the Group for the twelve month period ended 30th April 2021, was GBP16.5 million (2020: GBP12.1 million), an increase of 36% on a revenue of GBP131 million (2020: GBP145 million). The Directors propose an increased dividend of 102.24p (2020: 81.71p) per share.
In what has been another year of unique challenges, I am delighted that excellent progress has been made particularly during the second half of the year in many areas with the Group's workload as at the time of writing remaining healthy at GBP165 million (2020: GBP183 million).
Despite the placement of large capital projects having slowed as expected due to the world having to adapt to new working arrangements, headway has been made within the Mechanical Engineering Division on the nuclear propulsion engineering products and the nuclear waste containment box supply agreement. The performance achieved in the year is a reflection of the Group's strength through diversification, supplying a wide range of customers, countries and markets. Following the Group's decisive actions last financial year with the global onset of Covid-19, the Group protected its workforce and ensured our manufacturing facilities continued to operate. In doing so, we placed ourselves in a strong position to tackle the headwinds that were faced during the year ended 30th April, 2021.
Whilst Covid-19 has been the most recent global 'Black Swan' event, it is coupled with another shockwave sweeping the globe, namely the pace of the uptake of greener energy with the oil majors now rapidly investing in green energy products rather than new oilfields. So when looking at the Mechanical Engineering Division, our steel foundry, Goodwin Steel Castings Limited, has faced a difficult year due to the accelerated decline of capital flows into oil projects. Whilst it has progressed well with transitioning its business away from the oil industry, it has also been hindered by Covid-19 delaying documentation approvals that would have enabled the foundry to achieve higher levels of casting activity in the year within its new targeted markets.
Looking forward, Goodwin Steel Castings should soon start to accelerate the production of 30 tonne cast nuclear waste boxes, the initial castings of which are being successfully delivered to Goodwin International Limited for machining, painting and assembly. The foundry is also having good success winning work for naval vessels both in the UK and the USA, all for long running programmes that will span decades to come in an area where there are significant time barriers to entry for other foundries.
Profitability in our submersible pump businesses in India, Australia, Africa and Brazil has materially improved, a reflection of the four companies maturing and the global metal prices having dramatically recovered. They have all performed admirably by carrying out more servicing for existing customers on the sizeable global fleet of Goodwin pumps now deployed. The submersible pump companies in the financial year just completed generated 14% of the Group pre-tax profitability. With minerals pricing across the board generally being high, our target customers that use our pumps are profitable and are expected to continue with their delayed capital expenditure in the new financial year.
Goodwin International has had another successful year with a good mix of business, supplying a growing range of capabilities to their valve, nuclear waste, naval propulsion and ship construction customers. Within the year a new 1.5 acre facility, with multiple 100 tonne overhead cranes and a new radiography bay, has become operational and has started to fill up with work already on order.
Valve sales to the oil industry in the last financial year represented 43% of activity for Goodwin International and in this new financial year, whilst Goodwin International's overall sales output remains extremely robust as they have orders on hand, the valve activity for the oil industry is expected to drop to less than 33% of activity as the manufacture relating to nuclear waste products, propulsion, and naval hull components is rapidly increasing.
Easat Radar Systems' recovery to profitability has also been impacted due to the severe decline in global air traffic associated with Covid-19, starving many airports of cash. Whilst market expectations forecast that air traffic levels are to return to their historic 2019 levels by 2022 / 2023, infrastructure surveillance projects continue to be planned and Easat has a growing pipeline of opportunities with the bids being submitted substantially increasing in size and therefore margin potential.
The Board has high expectations for Easat Radar Systems as it moves away from selling only the mechanical parts of a radar system. Since the integration with NRPL, based in Finland, in 2015, followed by a period of design enhancements to their transceivers and interrogators, we are now marketing and selling complete air traffic control and coastal surveillance systems inclusive of the air traffic control systems and screens, recorded radios and runway lighting control to guide planes on the tarmac should the customer so desire. The sales value of a complete system is in excess of ten times that of the original mechanical components that were previously manufactured, and, now, with our vertically integrated product offering, we have a system that not only performs excellently but is internationally competitive. The major area of growth for Easat over the coming years will be in the Far East, where in the year, despite the travel restrictions and national lockdown, Easat has successfully commissioned two of the three turnkey radar systems for which it had orders.
Whilst Goodwin Steel Castings and Easat Radar Systems have not recently been firing on all cylinders, the Board firmly believes that both businesses will become profitable again moving forward with the transitions they have both been through.
Within the Refractory Engineering Division, increased levels of consumer spending in the second half of the year on luxury goods, horticulture and construction, as a consequence of Covid-19 restrictions redirecting consumer spending away from entertainment, hospitality and travel towards these sectors, has resulted in strong performance, making up for the low activity levels in the first half of the financial year due to the onset of Covid-19. Business levels remain strong with continued high levels of pent-up consumer spending. The Division achieved a record pre-tax profit of GBP9.3 million (2020: GBP7 million), equating to 46% of the Group profitability.
Customer acceptance trials of the patented Silica Free Investment Powder, X-Sil, are underway and it is hoped that regular sales will start within the year ahead, further increasing the Group's market share within the industry sector.
Sales of the patented AVD Lith-EX lithium battery fire extinguishers and vermiculite-containing fluids continue to gain momentum with industry sectors, insurance companies and accreditation bodies waking up to the need and requirement for products and standards that specify their use on lithium battery fires which other extinguishing agents do not effectively extinguish.
Key industry sectors adopting the products include electric car manufacturers, car repair workshops, battery manufacturers, battery recyclers, energy storage systems, e-mobility manufacturers, e-mobility storage and repair, marine and military.
Sales of patented Soluform concrete bag work doubled within the year with good prospects for future growth with the use of the product in large scale projects such as HS2 and Thames Tideway Tunnel, along with many other projects for the formation of headwalls, culverts, scour protection, retaining walls and bridge pier protection.
As at 30th April, 2021, the Group finished the year with a net debt and gearing of GBP17.4 million and 15.4% respectively, as calculated in note 26 (d) to the financial statements to be published shortly. The strength of the Group's cash generation was a result of staying operational throughout the pandemic, which meant that the Group has been able to stay within its funding headroom without the need to approach our financial lenders for additional facilities. Furthermore, the Group has not needed to cancel any capital expenditure projects; raise additional funds from shareholders; nor has it any outstanding deferral of tax payments with HMRC. The CCFF loan that was drawn down as an insurance policy during the financial year and referred to in the previous Chairman's Statement, was fully repaid on 26th April, 2021.
Armed with a strong balance sheet and a renewed set of bank facilities we are well placed to benefit from the recovery of the global economy and deliver strong returns on the capital that has been invested to date. The Board remains confident of the Group's ability to continue to develop new and existing activities that will deliver additional sustainable growth in the long-term.
The Board is once again indebted to our Directors, managers and employees around the world for their unwavering efforts in keeping the Group operational, controlling cost and delivering what can only be described as an extraordinary Group result in the year of Covid-19 just completed.
11(th) August, 2021 T.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, competitive 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 product range and 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;
-- to manage the environmental and social impacts of our business to support long-term sustainability.
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, our overseas business facilities and our global sales and marketing activities, the Group benefits from market diversity. Further details of our business and products are shown on our website www.goodwin.co.uk
Mechanical Engineering
The Group specialises in supplying industrial goods, generally on a project basis, more often than not involving the complementary skillset of other Group companies to deliver the requirement. The projects normally involve international procurement, high integrity castings, forgings or wrought high alloy steels, precision CNC machining, complex welding and fabrication, and other operations as are required. In addition to specialist projects, the Group manufactures and sells a wide range of dual plate check valves, axial nozzle check valves and axial piston control and isolation valves to serve the oil, petrochemical, gas, liquefied natural gas (LNG), mining, nuclear power generation, nuclear waste treatment 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 nuclear waste treatment plants, high integrity offshore structural components and bridges, chemical plants, oil refineries and naval vessels.
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 decommissioning, the oil and gas industry, as well as large, global projects requiring high integrity machined castings.
Goodwin International Limited, the largest company in the mechanical engineering division, not only designs and manufactures dual plate check valves, axial nozzle check valves and axial piston control and isolation valves but also undertakes specialised CNC machining and fabrication work for nuclear decommissioning projects. Goodwin International also has a division that is focussed on manufacturing / machining high precision, high integrity components for naval marine vessels. Noreva GmbH also designs, manufactures and sells axial nozzle check valves. Both Goodwin International and Noreva purchase the majority of the value of their sand mould castings from Goodwin Steel Castings Limited for their ranges of check valves and this vertical integration gives rise to competitive benefits, increased efficiencies and timely deliveries.
At Goodwin Pumps India Private Limited we manufacture a superior range of submersible slurry pumps for end users in India, Brazil, Australia and Africa. Easat Radar Systems Limited and its subsidiary, NRPL Aero Oy, design and build bespoke high-performance radar antenna systems for the global market of major defence contractors, civil aviation authorities and border security agencies. Easat has a sister company, Easat Radar Systems India Private Limited, that also manufactures, sells and maintains radar systems for air traffic control. 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 Limited (GRS) primarily generates value from designing, manufacturing and selling investment casting powders, rubbers and waxes to the jewellery casting industry. GRS also manufactures and sells investment casting powders to the tyre mould and aerospace industries. The Refractory Engineering Division has five other investment powder manufacturing companies located in China, India and Thailand which sell the consumable investment casting products directly and through distributors to the jewellery casting industry and also directly to tyre mould and aerospace industries.
These companies are vertically integrated with another of our UK companies, Hoben International Limited, which manufactures cristobalite, which it sells to the six casting powder manufacturing companies as well as producing ground silica that also goes into casting powders and other UK uses of silica such as wind turbine blade manufacture. Hoben International manufactures different grades of perlite, and a patented range of biodegradable bags, known as Soluform, for the placement of concrete in or around rivers and other construction applications.
The other UK refractory company is Dupré Minerals Limited 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 precision casting industry. Dupre has designed, patented and is now selling a range of fire extinguishers and an extinguishing agent for lithium battery fires that utilises a vermiculite dispersion as the fire extinguishing agent.
GOODWIN PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the year ended 30th April, 2021
2021 2020 GBP'000 GBP'000 CONTINUING OPERATIONS Revenue 131,231 144,512 Cost of sales (92,230) (109,743) GROSS PROFIT 39,001 34,769 Other income 763 690 Distribution expenses (2,988) (2,792) Administrative expenses (19,682) (19,809) OPERATING PROFIT 17,094 12,858 Finance costs (net) (640) (809) Share of profit of associate company 60 66 PROFIT BEFORE TAXATION 16,514 12,115 Tax on profit (3,508) (3,775) PROFIT AFTER TAXATION 13,006 8,340 ATTRIBUTABLE TO: Equity holders of the parent 12,494 7,866 Non-controlling interests 512 474 PROFIT FOR THE YEAR 13,006 8,340 BASIC EARNINGS PER ORDINARY SHARE 167.82p 107.93p DILUTED EARNINGS PER ORDINARY SHARE 164.23p 103.31p
GOODWIN PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30th April, 2021
2021 2020 GBP'000 GBP'000 PROFIT FOR THE YEAR 13,006 8,340 OTHER COMPREHENSIVE INCOME / (EXPENSE) ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: Goodwill arising from purchase of non-controlling interest in subsidiaries - (72) ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: Foreign exchange translation differences (1,371) (1,007) Effective portion of changes in fair value of cash flow hedges 1,296 (355) Ineffectiveness in cash flow hedges transferred (657) - to profit or loss Change in fair value of cash flow hedges transferred to profit or loss 1,932 522 Effective portion of changes in fair value of cost of hedging (37) (843) Ineffectiveness in cost of hedging transferred 631 - to profit or loss Change in fair value of cost of hedging transferred to profit or loss 381 395 Tax (charge) / credit on items that may be reclassified subsequently to profit or loss (673) 77 OTHER COMPREHENSIVE INCOME / (EXPENSE) FOR THE
YEAR, NET OF INCOME TAX 1,502 (1,283) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 14,508 7,057 PROFIT FOR THE YEAR ATTRIBUTABLE TO: Equity holders of the parent 14,081 6,587 Non-controlling interests 427 470 14,508 7,057
GOODWIN PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30th April, 2021
Total attributable Cash to equity Share-based flow Cost holders Share Translation payments hedge of hedging Retained of the Non-controlling Total capital reserve reserve reserve reserve earnings parent interests equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 YEARED 30TH APRIL, 2021 Balance at 1st May, 2020 736 361 5,244 (499) (743) 99,918 105,017 4,585 109,602 Total comprehensive income: Profit for the year - - - - - 12,494 12,494 512 13,006 Other comprehensive income: Foreign exchange translation differences - (1,255) - - - - (1,255) (116) (1,371) Effective portion of changes in fair value - - - 1,252 (42) - 1,210 49 1,259 Ineffectiveness transferred to profit or loss - - - (617) 596 - (21) (5) (26) Change in fair value transferred to profit or loss - - - 1,957 362 - 2,319 (6) 2,313 Tax - - - (492) (174) - (666) (7) (673) TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR - (1,255) - 2,100 742 12,494 14,081 427 14,508 Transactions with owners: Issue of shares 17 - - - - - 17 - 17 Dividends paid - - - - - (6,016) (6,016) (125) (6,141) Recycling of translation reserve on disposal of subsidiary - 42 - - - - 42 - 42 BALANCE AT 30TH APRIL, 2021 753 (852) 5,244 1,601 (1) 106,396 113,141 4,887 118,028 Total attributable Cash to equity Share-based flow Cost holders Share Translation payments hedge of hedging Retained of the Non-controlling Total capital reserve reserve reserve reserve earnings parent interests equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 YEARED 30TH APRIL, 2020 Balance at 1st May, 2019 720 1,044 4,991 (573) (426) 99,409 105,165 4,126 109,291 Total comprehensive income: Profit for the year - - - - - 7,866 7,866 474 8,340 Other comprehensive income: Foreign exchange translation differences - (964) - - - - (964) (43) (1,007) Goodwill arising from purchase of NCI interest in subsidiaries - - - - - (72) (72) - (72) Effective portion of changes in fair value - - - (446) (802) - (1,248) 50 (1,198) Change in fair value transferred to profit or loss - - - 522 398 - 920 (3) 917 Tax - - - (2) 87 - 85 (8) 77 TOTAL COMPREHENSIVE INCOME / (EXPENSE) FOR THE YEAR - (964) - 74 (317) 7,794 6,587 470 7,057 Transactions with owners Issue of shares 16 - - - - - 16 - 16 Dividends paid - - - - - (6,927) (6,927) - (6,927) Tax on equity-settled share-based payment transactions - - 253 - - - 253 - 253 Acquisition of NCI without a change in control - - - - - - - (11) (11) Recycling of translation reserve on disposal of subsidiary - (77) - - - - (77) - (77) Reclassification - 358 - - - (358) - - - BALANCE AT 30TH APRIL, 2020 736 361 5,244 (499) (743) 99,918 105,017 4,585 109,602
GOODWIN PLC
CONSOLIDATED BALANCE SHEET
at 30th April, 2021
2021 2020 GBP'000 GBP'000 NON-CURRENT ASSETS Property, plant and equipment 77,063 69,626 Right-of-use assets 3,691 5,343 Investment in associate 829 816 Intangible assets 24,813 24,695 Derivative financial assets 191 749 Other financial assets at amortised cost - 252 106,587 101,481 CURRENT ASSETS Inventories 34,547 44,887 Contract assets 15,844 6,558 Trade receivables and other financial assets 20,540 24,486 Other receivables 5,627 4,566 Derivative financial assets 4,106 456 Cash and cash equivalents 15,160 9,840 95,824 90,793 TOTAL ASSETS 202,411 192,274 CURRENT LIABILITIES Borrowings 1,607 14,624 Contract liabilities 14,332 18,965 Trade payables and other financial liabilities 21,730 23,485 Other payables 4,025 3,298 Derivative financial liabilities 2,016 1,071 Liabilities for current tax 1,174 1,873 Provisions for liabilities and charges 608 160 45,492 63,476 NON-CURRENT LIABILITIES Borrowings 33,066 15,599 Derivative financial liabilities - 202 Provisions for liabilities and charges 251 324 Deferred tax liabilities 5,574 3,071 38,891 19,196 TOTAL LIABILITIES 84,383 82,672 NET ASSETS 118,028 109,602 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Share capital 753 736
Translation reserve (852) 361 Share-based payments reserve 5,244 5,244 Cash flow hedge reserve 1,601 (499) Cost of hedging reserve (1) (743) Retained earnings 106,396 99,918 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 113,141 105,017 NON-CONTROLLING INTERESTS 4,887 4,585 TOTAL EQUITY 118,028 109,602
GOODWIN PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30th April, 2021
2021 2021 2020 2020 GBP'000 GBP'000 GBP'000 GBP'000 CASH FLOW FROM OPERATING ACTIVITIES Profit from continuing operations after tax 13,006 8,340 Adjustments for: Depreciation of property, plant and equipment 5,696 5,874 Depreciation of right of use assets 972 827 Amortisation and impairment of intangible assets 1,566 1,328 Finance costs (net) 640 809 Foreign exchange losses 292 203 (Profit) / loss on sale of property, plant and equipment (745) 52 Profit on disposal of subsidiary (32) (172) Share of profit of associate company (60) (66) Tax expense 3,508 3,775 OPERATING PROFIT BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS 24,843 20,970 Decrease in inventories 10,344 4,748 Increase in contract assets (9,242) (2,863) Decrease / (increase) in trade and other receivables 2,885 (2,549) (Decrease) / increase in contract liabilities (4,428) 874 Increase in trade and other payables 1,047 2,310 Increase in unhedged derivative balances (438) (980) CASH GENERATED FROM OPERATIONS 25,011 22,510 Interest paid (734) (844) Corporation tax paid (3,068) (2,493) NET CASH INFLOW FROM OPERATING ACTIVITIES 21,209 19,173 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment 1,958 139 Acquisition of property, plant and equipment (11,738) (6,062) Additional investment in existing subsidiaries - (83) Acquisition of intangible assets (719) (1,855) Development expenditure capitalised (1,420) (1,105) NET CASH OUTFLOW FROM INVESTING ACTIVITIES (11,919) (8,966) CASH FLOWS FROM FINANCING ACTIVITIES Issue of shares 17 16 Payment of capital element of lease liabilities (1,635) (1,463) Dividends paid (6,016) (6,927) Dividends paid to non-controlling interests (125) - Proceeds from new loans 35,048 7,658 Repayment of loans and committed facilities (30,772) - NET CASH OUTFLOW FROM FINANCING ACTIVITIES (3,483) (716) NET INCREASE IN CASH AND CASH EQUIVALENTS 5,807 9,491 Cash and cash equivalents at beginning of year 9,449 493 Effect of exchange rate fluctuations on cash held (96) (535) CASH AND CASH EQUIVALENTS AT OF YEAR 15,160 9,449
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's operations expose it to a variety of risks and uncertainties. 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.
Covid-19 risk: The Covid-19 pandemic continues to have a global impact in varying degrees affecting the population, travel, supply chains, and the global marketplace. The spread temporarily impacted market demand for certain of our products in the first half of the financial year just completed, as well as delaying the placement of larger capital orders by our customers. We have also been contending with increased costs and shipping times from our overseas suppliers which have also been exacerbated by the grounding of the "Ever Green" container ship in the Suez Canal which whilst afloat has only just docked. It is being suggested that the combination of Covid-19 and the Ever Green incident will result in shipping costs and times being disrupted for at least another two years. The intercountry supply chain may face difficulties in the short to medium term in timely and economically fulfilling our requirements due to the stretched international shipping network, but fortunately we have so far been able to work around these issues. During the year the Group continued to dynamically adapt as circumstances changed to protect the wellbeing of the workforce and to ensure facilities remained operational and able to satisfy the orders in hand, which maintained the Group's financial strength.
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 3 to the financial statements to be published shortly , 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 three 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 annual turnover.
As described in the Business Model, and to emphasize the Group's spread of market risk, the mechanical engineering division generates significant sales not only from valves it supplies to oil, gas, chemical and water markets, but increasingly significant amounts from other areas such as nuclear new build and decommissioning, naval propulsion marine applications, and ship hull components. With the submersible pumps that are supplied to the mining industries and radar systems that are supplied for civil and defence applications it is clear that the mechanical engineering is now well diversified. Within the refractory engineering division, we manufacture and sell vermiculite and perlite products to the insulating, horticulture and fire prevention industries and our investment casting powder companies indirectly sell to the jewellery consumer market through the supply of investment casting moulding powders, waxes, silicone and natural rubber and so again we see a good spread of business within this division.
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.
Supply chain and equipment risk: Failure of a major supplier or essential item of equipment presents a constant risk of disruption to the manufacturing in progress. Where reasonably possible, management mitigates and controls the risk with the use of dual sourcing, continual maintenance programmes, and by carrying adequate levels of stocks and spares to reduce any disruption.
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 26 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. As reported elsewhere within these financial statements the Company on 2nd July 2021 has acted to mitigate the possible impact of higher interest rates by taking out an interest rate swap derivative fixing GBP30 million of notional debt at less than 1% versus the variable inter-bank lending rate (SONIA) for a period of ten years.
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.
IT security: The Group performs regular and remote off site backups of its IT systems, from time to time engaging external companies to test and report any weaknesses and deficiencies found to enable solutions to be put in place to mitigate and minimise the risk of an IT security breach.
Brexit: As envisaged and disclosed in previous annual reports Brexit has not been seen as a significant issue to the Group, the previously identified risks have been managed or mitigated and the Board no longer consider this as a significant uncertainty
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 Directors Report and Accounts
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 or loss 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 Directors' 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:
T. J. W. Goodwin, Chairman
M. S. Goodwin, Managing Director, Mechanical Engineering Division
S. R. Goodwin, Managing Director, Refractory Engineering Division
J. Connolly, Director
B. R. E. Goodwin, Director
N. Brown, 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 accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The Accounting Policies are included in Note 1 of the Accounts to be published shortly.
New IFRS standards and interpretations adopted during 2021
In 2021 the following amendments had been endorsed by the EU, became effective and were, therefore, mandated to be adopted by the Group:
-- Amendments to IFRS 9, IAS39 and IFRS 7 - Interest rate benchmark reform phase 1 (effective for annual periods beginning on or after 1st January 2020)
-- Amendments to IFRS 3 - Definition of a business (effective for annual periods beginning on or after 1st January 2020)
-- Amendments to IAS 1 and IAS 8 - Definition of material (effective for annual periods beginning on or after 1st January 2020)
-- Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods beginning on or after 1st January 2020)
The implementation 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, 2021 or 2020 but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies, and those for 2021 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 2021 accounts are expected to be posted to shareholders within the next 10 days 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. Associates are included in Refractory Engineering.
In accordance with the requirements of IFRS 8 i nformation regarding the Group's operating segments is reported below.
Mechanical Engineering Refractory Engineering Sub Total Year ended 30th April 2021 2020 2021 2020 2021 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue External sales 86,616 100,078 44,615 44,434 131,231 144,512 Inter-segment sales 20,871 25,821 11,526 8,361 32,397 34,182 Total revenue 107,487 125,899 56,141 52,795 163,628 178,694 Reconciliation to consolidated revenue: Inter-segment sales (32,397) (34,182) Consolidated revenue for the year 131,231 144,512 Mechanical Engineering Refractory Engineering Sub Total Year ended 30th April 2021 2020 2021 2020 2021 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Profits Operating profit including share of associates 10,823 8,065 9,340 7,034 20,163 15,099 % of total operating profit including share of associates 54% 53% 46% 47% 100% 100% Group centre (3,009) (2,175) Group finance expenses (640) (809) Consolidated profit before tax for the year 16,514 12,115
Tax (3,508) (3,775) Consolidated profit after tax for the year 13,006 8,340 Segmental total Segmental total Segmental net assets liabilities assets Year ended 30th April 2021 2020 2021 2020 2021 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Segmental net assets Mechanical Engineering 92,929 95,193 66,909 72,207 26,020 22,986 Refractory Engineering 44,114 41,962 20,591 22,850 23,523 19,112 Sub total reportable segment 137,043 137,155 87,500 95,057 49,543 42,098 Goodwin PLC net assets 83,998 83,415 Elimination of Goodwin PLC investments (25,392) (25,801) Goodwill 9,879 9,890 Consolidated total net assets 118,028 109,602
Segmental capital expenditure
Property, Right-of-use Intangible Total plant and assets assets equipment Year ended 2021 2020 2021 2020 2021 2020 2021 2020 30th April GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Goodwin PLC 5,315 2,824 1,180 - 151 2,333 6,646 5,157 Mechanical Engineering 4,952 2,511 1,146 156 1,123 613 7,221 3,280 Refractory Engineering 1,570 633 74 1,033 456 633 2,100 2,299 1 3,573,5799 11,837 5,968 2,400 1,189 1,730 3,579 15,967 10,736 2021 2020
Segmental depreciation, amortisation and impairment
Depreciation Amortisation and Total impairment Year ended 30th April 2021 2020 2021 2020 2021 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Goodwin PLC 2,970 2,934 1,106 708 4,076 3,642 Mechanical Engineering 2,346 2,369 20 97 2,366 2,466 Refractory Engineering 1,352 1,398 440 523 1,792 1,921 6,668 6,701 1,566 1,328 8,234 8,029
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, Year ended 30th April, 2020 2021 Operational Non-current Capital Operational Non-current Capital Revenue net assets assets expenditure Revenue net assets assets expenditure GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 UK 39,755 81,982 89,944 13,634 39,609 76,467 84,198 8,681 Rest of Europe 21,473 8,309 3,264 279 20,004 8,346 3,439 207 USA 8,027 - - - 12,749 - - - Pacific Basin 28,255 13,708 6,499 719 34,844 13,513 7,132 1,248 Rest of World 33,721 14,029 6,880 1,335 37,306 11,276 6,712 600 Total 131,231 118,028 106,587 15,967 144,512 109,602 101,481 10,736
Of the GBP21,473,000 (April 2020 : GBP20,004,000 ) sales to the rest of Europe, GBP8,366,000 (April 2020 : GBP5,975,000 ), relate to the European sales of our German-domiciled subsidiary, Noreva GmbH.
The following tables provide an analysis of revenue by geographical market and by product line.
Geographical market
Year ended 30th April, Year ended 30th April, 2020 2021 Mechanical Refractory Mechanical Refractory Engineering Engineering Total Engineering Engineering Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 UK 28,258 11,497 39,755 29,187 10,422 39,609 Rest of Europe 15,123 6,350 21,473 13,088 6,916 20,004 USA 7,596 431 8,027 12,664 85 12,749 Pacific Basin 10,899 17,356 28,255 16,361 18,483 34,844 Rest of World 24,740 8,981 33,721 28,778 8,528 37,306 Total 86,616 44,615 131,231 100,078 44,434 144,512
Product lines
Year ended 30th April, Year ended 30th April, 2020 2021 Mechanical Refractory Mechanical Refractory Engineering Engineering Total Engineering Engineering Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Standard products and consumables 10,630 44,615 55,245 9,545 44,434 53,979 Bespoke products - point in time 11,203 - 11,203 25,427 - 25,427 Point in time revenue 21,833 44,615 66,448 34,972 44,434 79,406 Minimum period contracts 3,306 - 3,306 4,143 - 4,143 Bespoke products - over time 61,477 - 61,477 60,963 - 60,963 Over time revenue 64,783 - 64,783 65,106 - 65,106 Total revenue 86,616 44,615 131,231 100,078 44,434 144,512
Note 2
Dividends
The Directors propose the payment of an ordinary dividend of 102.24p per share (2020: ordinary dividend of 81.71p ). If approved by shareholders, the ordinary dividend will be paid on 8th October, 2021 to shareholders on the register at the close of business on 17(th) September, 2021.
Note 3
Earnings per share
Number of ordinary shares 2021 2020 Ordinary shares in issue Balance at 1st May, 2020 (1st May, 2019 ) 7,363,200 7,200,000 Shares issued in the year 163,200 163,200 7,526,400 7,363,200 Outstanding ordinary share options 163,200 326,400 Total ordinary shares (issued and options) 7,689,600 7,689,600 Weighted average number of ordinary shares in issue 7,445,024 7,288,289 Weighted average number of outstanding ordinary share options 162,651 325,365 Denominator used for diluted earnings per share calculation 7,607,675 7,613,654 2021 2020 GBP'000 GBP'000 Relevant profits attributable to ordinary shareholders 12,494 7,866
Note 4
Going concern
The Directors, after having reviewed the projections and possible challenges that may lie ahead, believe that, there is a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of these financial statements, and have continued to adopt the going concern basis in preparing the financial statements.
During April 2021, the Company repaid in full the GBP30 million drawn down from the Bank of England's CCFF scheme and having completed the refinancing of GBP10 million referred to within 30th April, 2020 accounts, currently has at its disposal GBP50.5 million of Bank facilities, GBP44.5 million of which are vested in long term committed facilities.
The Directors have, as part of this going concern assessment, considered the ongoing impact of Covid-19 on the Group's operations. We are now more than 18 months on from the onset of Covid-19 and whilst we experienced a slow down in the Refractory Engineering segment of the business during March 2020 to August 2020, since then most of the entities in this division are seeing record levels of activity. As predicted when writing within the 30th April, 2020 going concern assessment, there has been little Covid-19 impact on the Mechanical Engineering segment of the business. Whilst we have and are still seeing temporary impacts on our overseas pump company operations, we are thankfully seeing minimal impact on Group activities as a result of the virus pandemic.
Within our severe but plausible downside model, it is demonstrable that the Group has sufficient funds to cover the Group's and the Company's financial commitments during the forecast period whilst remaining compliant with its financial covenants. The downside model factors in adverse circumstances such as the loss of a major customer and a new Covid-19 impact on our Refractory Engineering segment.
Since the end of the financial year, the Company has entered into a ten year interest rate swap agreement which fixes our variable interest rate on borrowings at less than 1% for the entire period. The Directors see no shortage of investment opportunities in the coming years and so, given the historical low level of interest rates, we deemed it prudent to remove the impact of higher interest rates from our risk modelling.
Whilst our carrying values of trade debtors and contract assets are significant, we see little risk here in terms of recovery. We credit insure our debtors and pre credit risk (work in progress) and for significant contracts where credit insurance is not available, we ensure, where possible, that these contracts are backed by letters of credit or cash positive milestone payments.
As discussed elsewhere within these accounts, the Mechanical Engineering order book remains very high and the Refractory Engineering segment is buoyant.
The Directors are confident that the Group and Company will have sufficient funds to continue to meet their liabilities as they fall due for at least twelve months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
Note 5
Annual General Meeting
The Annual General Meeting will be held at 10.30 a.m. on 6th October, 2021 at Crewe Hall, Weston Road, Crewe, Cheshire CW1 6UZ.
Note 6
Alternative performance measures
Measure 2021 2020 Gross profit (GBP'000) 39,001 34,769 Revenue (GBP'000) 131,231 144,512 Gross profit as percentage of revenue (%) 29.7 24.1 Operating profit (GBP'000) 17,094 12,858 Capital employed (GBP'000) 130,572 123,834 Return on capital employed (%) 13.1 10.4 Net debt (GBP'000) 17,431 18,817 Net assets attributable to equity holders of the parent(GBP'000) 113,141 105,017 Gearing (%) 15.4 17.9 Net profit attributable to equity holders of the parent (GBP'000) 12,494 7,866 Net assets attributable to equity holders of the parent(GBP'000) 113,141 105,017 Return on investment (%) 11.0 7.5 Revenue (GBP'000) 131,231 144,512 Average number of employees 1,129 1,190 Sales per employee (GBP'000) 116 121 Annual post tax profit (GBP'000) 13,006 8,340 Depreciation owned assets (GBP'000) 5,696 5,874 Depreciation right-of-use assets (GBP'000) 972 827 Amortisation and impairment (GBP'000) 1,566 1,328 Exclude operating lease depreciation (GBP'000) (550) (537) Annual post tax profit + depreciation + amortisation (GBP'000) 20,690 15,832
END
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