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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Goodwin Plc | LSE:GDWN | London | Ordinary Share | GB0003781050 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-10.00 | -0.15% | 6,630.00 | 6,460.00 | 6,800.00 | 6,800.00 | 6,460.00 | 6,800.00 | 585 | 16:35:01 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Engineering Services | 185.74M | 15.9M | 2.1178 | 30.50 | 485.12M |
TIDMGDWN
RNS Number : 3973X
Goodwin PLC
19 December 2019
GOODWIN PLC
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the half year ended 31st October 2019
CHAIRMAN'S STATEMENT
The pre-tax profit for the Group for the six month period ending 31st October 2019 was GBP7.4 million some 5.1% down (2018 GBP7.8 million). This deterioration was despite the turnover for the period being marginally in front with a 3.8% increase. This is a feature of the disruption caused by the commotions in our parliamentary system over the past six months where the uncertainty has temporarily stalled projects.
With further clarity over Brexit, we will be looking to start capitalising from the tremendous success our Group companies have had in winning large amounts of business from new market areas.
We have every reason to believe that the new financial year will allow our Group companies to start increasing profits. We also expect to have further successes in winning significant new business due to the dedication and hard work of all who work within them.
T. J. W. Goodwin Chairman 19th December 2019
Management Report
Financial Highlights
Unaudited Unaudited Audited Half Year Half Year Year Ended to to 31st October 31st October 30th April 2019 2018 2019 GBP'm GBP'm GBP'm Consolidated Results Revenue 70.1 67.5 127.0 Operating profit 7.8 7.8 16.4 Profit before tax 7.4 7.8 16.4 Profit after tax 5.6 5.7 12.4 ------------------------------ ------------- ------------- ------------ Capital Expenditure 2.9 5.7 10.7 ------------------------------ ------------- ------------- ------------ Earnings per share - basic 72.92p 74.90p 159.79p ------------------------------ ------------- ------------- ------------ Earnings per share - diluted 69.77p 73.44p 149.65p
IFRS 16
The Group adopted IFRS 16 from 1 May 2019, using the modified retrospective approach to transition, such that prior periods have not been restated. The impact of the change in accounting policy is outlined in note 5.
Turnover
Sales revenue of GBP70,090,000 for the half year represents a 3.8 % increase from the GBP67,548,000 achieved during the same period last year.
Profit Before Tax
Profit before tax for the six months of GBP7,406,000 is down 5.1% from the GBP7,804,000 achieved for the same six month period last year.
Key performance indicators
The key performance indicators for the business are listed below; the prior period KPIs have not been restated to reflect IFRS 16.
Unaudited Unaudited Audited Half Year Half Year Year Ended to to 31st October 31st October 30th April 2019 2018 2019 Gross profit as a % of turnover 27.8 29.5 32.0 Other income (in GBP millions) 0.7 - - Profit before tax (in GBP millions) 7.4 7.8 16.4 Gearing % (excluding deferred consideration and right-of-use lease liabilities) 25.7 12.1 20.0 Depreciation (in GBP millions) 3.2 2.8 5.8 Depreciation of right-of-use assets 0.4 (in GBP millions) - - Amortisation (in GBP millions) 0.5 0.5 1.3 Equity-settled share-based provision (in GBP millions) - 0.5 1.2 --------------------------------------------- ------------- ------------- ------------ Total non cash charges (in GBP millions) 4.1 3.8 8.3 --------------------------------------------- ------------- ------------- ------------
Alternative performance measures mentioned above are defined in note 36 on page 82 of the Group Annual accounts to 30th April 2019.
2020/21 Outlook
The Group is likely to show a similar profitability in the next six months as it achieved in the first six months of the year, with an improving cash flow by the 30th April 2020.
In the Mechanical Engineering Division, although the petrochemical market has not yet recovered, we continue to have a positive outlook based on the fact that the demand for energy is set to increase. This is propelled to a large extent by increases in wealth in the developing economies which obtain a growing share of their power from the US LNG market, in which Noreva and Goodwin International are well established.
Easat Radar Systems has been successful in winning an order to supply two turnkey surveillance systems for an Asian air force. The order is the first overseas system order for the company opening the door to a larger market within which, with its competitive offering as a result of the acquisition of NRPL, the company is expected to prosper.
Within the Refractory Engineering Division, there has been an unforeseen decrease in demand for the consumer orientated jewellery products for which we globally supply the casting powder. We believe this is due mainly to the uncertainty around the ongoing USA and China trade war and the rise in gold price since May that peaked in August and has declined ever since. However, at the time of writing, it appears the market is beginning to improve.
Sales of the AVD fire extinguishers and extinguishing agent are starting to grow with a constant monthly sales stream. First adopters have primarily been companies that manufacture products incorporating lithium ion batteries, such as e-scooters, vehicles and green energy storage systems. We are in technical and supply discussion with several large battery manufacturers both in the UK and overseas which may bode well over time.
Risks and Uncertainties
The Group, mainly through its centralised management structure, makes best endeavours to have in place internal control procedures to identify and manage the key risks and uncertainties affecting the Group. We would refer you to pages 10 and 11 of the Group Annual Accounts to 30th April 2019 which describe the principal risks and uncertainties, and to note 27 (starting on page 72) which describes in detail the key financial risks and uncertainties affecting the business such as credit risk and foreign exchange risk.
Judging the future relationship of the major currency pairs of the US Dollar, Sterling and the Euro continues to be a challenge.
Report on Expected Developments
This report describes the expected developments of the Group during the year ended 30th April 2020. The report may contain forward-looking 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 to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.
Going concern
The Group continues to trade profitably and with the current order book level we are confident that this will continue and improve, especially as we move in to the next financial year. As in previous periods, the levels of depreciation and amortisation (both non cash items) remain significant thus increasing the cash generating capability of the Group. As at 31st October 2019, the Group net debt stood at GBP27.2 million as set out in note 11 to these accounts. Whilst the net debt levels are higher than those recorded as at April 2019 and October 2018 the gearing level at 25.7% is still modest and our banking headroom (facilities versus utilisation) is significant. Furthermore, within the second half of this financial year we would expect to significantly reduce our investment in working capital. Given the foregoing, the Directors do not see an issue with the continued ability of the Group to meet its financial commitments and so have drawn up these accounts on a going concern basis.
Responsibility statement of the Directors in respect of the half-yearly financial report
The Directors confirm to the best of their knowledge that 1) this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that 2) the Interim Management Report and condensed financial statements include a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year) and 4.2.8R (being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so).
T. J. W. Goodwin Chairman 19th December 2019
Condensed Consolidated Statement of Profit or Loss
for the half year to 31st October 2019
Unaudited Unaudited Audited Half Year Half Year Year Ended to to 31st October 31st October 30th April 2019 2018 2019 GBP'000 GBP'000 GBP'000 Continuing operations Revenue 70,090 67,548 127,046 Cost of sales (50,610) (47,608) (86,414) Gross profit 19,480 19,940 40,632 Other income 689 - - Distribution expenses (1,629) (1,564) (3,016) Administrative expenses (10,715) (10,539) (21,205) Operating profit 7,825 7,837 16,411 Financial expenses (449) (303) (234) Share of profit of associate companies 30 270 233 Profit before taxation 7,406 7,804 16,410 Tax on profit (1,812) (2,076) (3,963) Profit after taxation 5,594 5,728 12,447 Attributable to: Equity holders of the parent 5,260 5,393 11,505 Non-controlling interests 334 335 942 Profit for the period 5,594 5,728 12,447 Basic earnings per ordinary share (Note 10) 72.92p 74.90p 159.79p Diluted earnings per ordinary share (Note 10) 69.77p 73.44p 149.65p
Condensed Consolidated Statement of Comprehensive Income
for the half year to 31st October 2019
Unaudited Unaudited Audited Half Year Half Year Year Ended to to 31st October 31st October 30th April 2019 2018 2019 GBP'000 GBP'000 GBP'000 Profit for the period 5,594 5,728 12,447 Other comprehensive income / (expense) Items that are or may be reclassified subsequently to the income statement Foreign exchange translation differences (162) (259) (383) Goodwill arising from purchase of non-controlling interest in subsidiaries (63) - (772) Effective portion of changes in fair value of cash flow hedges 1,928 (3,023) (644) Change in fair value of cash flow hedges transferred to profit or loss 379 - 180 Cost of hedging (239) 595 (440) Tax on items that are or may be reclassified subsequently to profit or loss (347) 413 154 Other comprehensive income / (expense) for the period, net of income tax 1,496 (2,274) (1,905) Total comprehensive income for the period 7,090 3,454 10,542 Attributable to: Equity holders of the parent 6,761 3,183 9,528 Non-controlling interests 329 271 1,014 7,090 3,454 10,542
Condensed Consolidated Statement of Changes in Equity
for the half year to 31st October 2019
Total attribut-able Cash to equity Share-based flow Cost holders Share Translat-ion payments hedge of hedging Retained of the Non-controll-ing 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 Half year to 31st October 2019 (Unaudited) Balance at 1st May 2019 720 1,044 4,991 (573) (426) 99,409 105,165 4,126 109,291 Total comprehensive income: Profit - - - - - 5,260 5,260 334 5,594 Other comprehensive income: Goodwill arising from purchase of NCI interest in subsidiary - - - - - (63) (63) - (63) Foreign exchange translation differences - (198) - - - - (198) 36 (162) Net movements on cash flow hedges - - - 1,937 (175) - 1,762 (41) 1,721 Total comprehensive income for the period - (198) - 1,937 (175) 5,197 6,761 329 7,090 Issue of shares 16 - - - - - 16 - 16 Dividends paid - - - - - (6,927) (6,927) - (6,927) Acquisition of NCI without a change of control - - - - - - - (11) (11) Other transactions - 358 - - - (358) - - - Balance at 31st October 2019 736 1,204 4,991 1,364 (601) 97,321 105,015 4,444 109,459
Condensed Consolidated Statement of Changes in Equity
for the half year to 31st October 2019
Total attribut-able Cash to equity Share-based flow Cost holders Share Translat-ion payments hedge of hedging Retained of the Non-controll-ing 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 Half year to 31st October 2018 (Unaudited) Balance at 1st May 2018 720 1,879 1,625 (224) - 95,568 99,568 5,259 104,827 Adjustment on initial application of IFRS 9 (net of tax) - - - 52 (52) - - - - Adjustment on initial application of IFRS 15 (net of tax) - original - - - - - 285 285 (56) 229 Adjustment on initial application of IFRS 15 (net of tax) - revision - - - - - (969) (969) (294) (1,263) Adjusted balance at 1st May
2018 720 1,879 1,625 (172) (52) 94,884 98,884 4,909 103,793 Total comprehensive income: Profit - - - - - 5,393 5,393 335 5,728 Other comprehensive income: Foreign exchange translation differences - (211) - - - - (211) (48) (259) Net movements on cash flow hedges - - - (2,594) 595 - (1,999) (16) (2,015) Total comprehensive income for the period - (211) - (2,594) 595 5,393 3,183 271 3,454 Equity-settled share-based payment transactions - - 523 - - - 523 - 523 Dividends paid - - - - - (6,074) (6,074) (451) (6,525) Balance at 31st October 2018 720 1,668 2,148 (2,766) 543 94,203 96,516 4,729 101,245
Condensed Consolidated Statement of Changes in Equity
for the half year to 31st October 2019
Total attribut-able Cash to equity Share-based flow Cost holders Share Translat-ion payments hedge of hedging Retained of the Non-controll-ing 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 Year ended 30th April 2019 Balance at 1st May 2018 720 1,879 1,625 (224) - 95,568 99,568 5,259 104,827 Adjustment on initial application of IFRS 9 (net of tax) - - - 52 (52) - - - - Adjustment on initial application of IFRS 15 (net of tax) - - - - - (684) (684) (350) (1,034) Adjusted balance at 1st May 2018 720 1,879 1,625 (172) (52) 94,884 98,884 4,909 103,793 Total comprehensive income: Profit - - - - - 11,505 11,505 942 12,447 Other comprehensive income: Foreign exchange translation differences - (430) - - - - (430) 47 (383) Goodwill arising from purchase of NCI interest in subsidiaries - (180) - - - (592) (772) - (772) Net movements on cash flow hedges - - - (401) (374) - (775) 25 (750) Total comprehensive income for the period - (610) - (401) (374) 10,913 9,528 1,014 10,542 Equity-settled share-based payment transactions - - 1,220 - - - 1,220 - 1,220 Tax on equity-settled share-based payment transactions - - 2,146 - - - 2,146 - 2,146 Dividends paid - - - - - (6,126) (6,126) (451) (6,577) Acquisition of NCI without a change of control - - - - - - - (1,750) (1,750) Disposal of equity investments - (225) - - - - (225) - (225) Acquisition of subsidiary with NCI - - - - - - - 142 142 Capital contribution - - - - - (262) (262) 262 - Balance at 30th April 2019 720 1,044 4,991 (573) (426) 99,409 105,165 4,126 109,291
Condensed Consolidated Balance Sheet
as at 31st October 2019
Unaudited Unaudited Audited as at as at as at 31st October 31st October 30th April 2019 2018 2019 GBP'000 GBP'000 GBP'000 Non-current assets Property, plant and equipment 63,481 71,713 74,106 Right-of-use assets 11,798 - - Investment in associates 817 2,290 739 Intangible assets 22,483 21,308 22,354 Other financial assets at amortised cost 361 564 505 98,940 95,875 97,704 Current assets Inventories 56,913 33,916 50,524 Contract assets 9,846 5,264 3,698 Trade and other financial assets 24,620 22,284 24,964 Other receivables 3,694 1,834 2,715 Deferred tax asset 84 - - Derivative financial assets 2,247 24 195 Cash and cash equivalents 9,416 7,577 9,640 106,820 70,899 91,736 Total assets 205,760 166,774 189,440 Current liabilities Bank overdrafts 3,340 3,654 9,147 Interest-bearing loans 4,080 5,088 112 Lease liabilities 2,131 902 939 Contract liabilities* 27,068 10,505 18,002 Trade payables and other financial liabilities 18,174 20,078 20,570 Other payables 6,471 4,461 4,771 Deferred consideration 204 500 204 Derivative financial liabilities 1,552 4,240 1,693 Liabilities for current tax 1,393 2,388 2,356 Warranty provision 235 99 261 64,648 51,915 58,055 Non-current liabilities Interest-bearing loans 22,310 8,000 19,322 Lease liabilities 6,342 1,637 1,164 Warranty provision 219 439 232 Deferred tax liabilities 2,782 3,538 1,376 31,653 13,614 22,094 Total liabilities 96,301 65,529 80,149 Net assets 109,459 101,245 109,291 Equity attributable to equity holders of the parent Share capital 736 720 720 Translation reserve 1,204 1,668 1,044
Share-based payments reserve 4,991 2,148 4,991 Cash flow hedge reserve 1,364 (2,766) (573) Cost of hedging reserve (601) 543 (426) Retained earnings 97,321 94,203 99,409 Total equity attributable to equity holders of the parent 105,015 96,516 105,165 Non-controlling interests 4,444 4,729 4,126 Total equity 109,459 101,245 109,291
*Contract liabilities include advance payments from customers of GBP26,820,000, with the balance of GBP248,000 being costs accrued for contracts.
Condensed Consolidated Statement of Cash Flows
for the half year ended 31st October 2019
Unaudited Unaudited Audited Half Year Half Year Year ended to 31st to 31st 30th April October October 2019 2019 2018 GBP'000 GBP'000 GBP'000 Cash flow from operating activities Profit from continuing operations after tax 5,594 5,728 12,447 Adjustments for: Depreciation 3,180 2,764 5,819 Depreciation of right-of-use assets 389 - - Amortisation of intangible assets 484 549 1,312 Financial expenses 449 303 234 Foreign exchange losses / (gains) 143 (127) 66 Loss / (profit) on sale of property, plant and equipment 2 (11) 13 Share of profit of associate companies (30) (270) (233) Equity-settled share-based provision - 523 1,220 Tax expense 1,812 2,076 3,963 Operating profit before changes in working capital and provisions 12,023 11,535 24,841 Increase in inventories (6,430) (2,442) (11,816) (Increase) / decrease in contract assets (6,107) (1,389) 1,361 Increase in trade and other receivables (849) (2,175) (4,288) Increase in contract liabilities 8,829 4,309 3,401 (Decrease) / increase in trade and other payables (522) 3,005 1,965 (Increase) / decrease in unhedged derivative balances (126) 617 (579) Cash inflow from operations 6,818 13,460 14,885 Interest paid (320) (193) (524) Corporation tax paid (1,775) (906) (3,093) Interest element of lease obligations (48) (32) (64) Net cash from operating activities 4,675 12,329 11,204 Cash flow from investing activities Proceeds from sale of property, plant and equipment 75 93 142 Acquisition of property, plant and equipment (3,156) (5,652) (11,451) Additional investment in existing subsidiaries (74) - (2,668) Acquisition of controlling interest in associates net of cash acquired - - (425) Acquisition of intangible assets (74) (232) (315) Development expenditure capitalised (297) (469) (1,500) Dividends received from associate companies - - 1,254 Net cash outflow from investing activities (3,526) (6,260) (14,963) Cash flows from financing activities Proceeds from issue of share capital 16 - - Payment of lease liability principal (714) (455) (911) Proceeds from new leases 5,054 - 424 Dividends paid (6,927) (6,074) (6,126) Dividends paid to non-controlling interests - (451) (451) Net proceeds from loans and committed facilities 6,949 1,977 8,337 Net cash inflow / (outflow) from financing activities 4,378 (5,003) 1,273 Net increase / (decrease) in cash and cash equivalents 5,527 1,066 (2,486) Cash and cash equivalents at beginning of year 493 2,900 2,900 Effect of exchange rate fluctuations on cash held 56 (43) 79 Closing cash and cash equivalents 6,076 3,923 493
Notes
to the Condensed Consolidated Financial Statements
1. Reporting entity
Goodwin PLC (the "Company") is a company incorporated in England and Wales. The unaudited condensed consolidated interim financial statements of the Company as at and for the six months ended 31st October 2019 comprise the Company, its subsidiaries, and the Group's interests in associates (together referred to as the "Group").
The audited consolidated financial statements of the Group as at and for the year ended 30th April 2019 are available upon request from the Company's registered office at Ivy House Foundry, Hanley, Stoke-on-Trent, ST1 3NR or via the Company's web site: www.goodwin.co.uk.
2. Statement of compliance
These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted in the EU. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the audited consolidated financial statements of the Group as at and for the year ended 30th April 2019.
The comparative figures for the financial year ended 30th April 2019 are extracts and not the full Group's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference 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.
The Audit Committee has reviewed these unaudited condensed consolidated interim financial statements and has advised the Board of Directors that, taken as a whole, they are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's half year performance. These unaudited condensed consolidated interim financial statements were approved by the Board of Directors on <Signing date>.
3. Significant accounting policies
The accounting policies applied by the Group in these unaudited condensed consolidated financial statements are the same as those applied by the Group in its audited consolidated financial statements as at and for the year ended 30th April 2019, with the exception of IFRS 16 Leases (see note 5). The changes in accounting policies are to be reflected in the Group's consolidated financial statements as at and for the year ending 30th April 2020.
The following standards and amendments became effective and therefore were adopted by the Group.
-- Amendments to IFRS 9 - Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1st January 2019)
-- IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments (effective for annual periods beginning on or after 1st January 2019)
-- Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1st January 2019)
-- Annual Improvements to IFRSs - 2015-17 Cycle - minor amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (effective for annual periods beginning on or after 1st January 2019)
-- IFRS 16 - Leases (effective for annual periods beginning on or after 1st January 2019)
The impact of IFRS 16 Leases, which replaces IAS 17 Leases and IFRIC 4, is outlined in note 5 below. The Group has considered the impact on profit, earnings per share and net assets in future periods, of the other new standards and interpretations referred to above, and none of the above standards or interpretations is expected to have a material impact.
New IFRS standards, amendments and interpretations not adopted
The IASB and IFRIC have issued additional standards and amendments which are effective for periods starting after the date of these financial statements. The following standards and amendments have not yet been adopted by the Group:
-- 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)
4. Accounting estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these unaudited consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the audited consolidated financial statements as at and for the year ended 30th April 2019, with the exception of leases (see note 5).
The tax charge in the period is based on management's estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period, and the impact of any disallowed costs.
5. Changes in significant accounting policies
Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 30th April 2019.
The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 30th April 2020.
The Group adopted IFRS 16 Leases initially from 1st May 2019. A number of other new standards are effective from 1st May 2019 but they are not expected to have a material effect on the Group's financial statements.
Prior to 1st May 2019, the Group's policy for operating leases was to recognise the lease payments in the statement of profit or loss on a straight-line basis over the term of the lease. With the implementation of IFRS 16, subject to the recognition exemptions as outlined below, a right-of-use asset is now recognised on the balance sheet together with an associated lease liability corresponding to the minimum envisaged lease period. Within the profit or loss account, depreciation is charged based on the expired element of the minimum lease term and finance charges expensed on an effective interest rate basis. Instead of being reported within Property, plant and equipment, such assets acquired under finance leases are now reported as right-of-use assets.
The updated Group accounting policy for leases is as follows:
Definition of a lease
A contract is a lease or contains a lease if it transfers the right to use an identified asset over the contract term, in exchange for payment. In determining whether a contract gives the Group the right to use an asset, the Group assesses whether:
-- the contract involves the use of an identified asset
-- the Group has the right to obtain substantially all of the economic benefits of using the asset; and
-- the Group has the right to direct the use of the asset by deciding how the asset is employed.
Lease term
The lease term is the non-cancellable period of a lease, and options to extend the lease or terminate it, where it is probable that the Group will exercise the available options. At the start of a lease, the Group makes a judgement about whether it is reasonably certain to exercise the options, and reassesses this judgement at every reporting period. Contracts, where the original lease term has expired, with assets continuing to be leased on a short-term rolling basis of a few months, are treated as short-term leases.
Lease balances
A right-of-use asset and a lease liability are calculated at the beginning of a lease. The right-of-use asset is measured initially at cost, being the opening lease liability, adjusted for any lease payments made by the start of the lease, adjusted for any initial direct costs, which have been incurred.
The lease liability is measured initially at the present value of the lease payments, which are outstanding at the start date, discounted at either the rate implicit in the lease or the Group's incremental borrowing rate. With the exception of leases containing an option to purchase, the Group uses its incremental borrowing rate as the discount rate. Lease liabilities are measured at amortised cost, using the effective interest rate, and adjusted as required for any subsequent change to the lease terms.
The right-of-use asset is depreciated on a straight-line basis over the lease term, or from the start date of the lease to the end of the useful life of the right-of-use asset as appropriate. The method of calculating the estimated useful lives of right-of-use assets and testing for impairment is the same as that for property, plant and equipment.
Recognition exemptions
Payments for short-term leases, lasting twelve months or less, without a purchase option continue to be reported as an operating expense on a straight line basis over the term of the lease.
The cost of leasing low-value items will continue to be reported as an operating expense over the life of the lease.
Lease portfolios
The Group has leases for the following types of assets:
Land and buildings
The Group leases a number of factory buildings, warehouses and office buildings.
Plant and equipment
A number of significant items of plant, such as CNC machines and furnaces, have been leased under contracts with an option to buy the asset at the end of the lease term. The Group also leases a small number of motor vehicles.
Printers and photocopiers
The Group has applied the recognition exemption for low-value assets to these leases.
Accounting estimates and judgements
The Group's contracts are such that the terms are generally very clear in establishing whether they are or contain leases, and consequently, significant judgements have not been required in assessing the contracts. The Group's incremental borrowing rates have been estimated separately for each country, in which leases are held, with rates ranging from 2.0% to 7.7%.
Transition
IFRS 16 has been implemented using the modified retrospective approach, because it does not require a full restatement of comparatives, but the cumulative opening impact is posted to reserves on the transition date.
For leases, which were previously classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and lease liability on transition is the same as the carrying amount of the lease asset and lease liability calculated in accordance with IAS 17.
A right-of-use asset and lease liability are now recognised for leases considered to be operating leases in accordance with IAS 17. As it is not possible to calculate the rate implicit in these leases, the lease liabilities are calculated as the present value of the remaining lease payments, discounted using the group's estimated incremental borrowing rate (IBR). Right-of-use assets are reported as the same value as the lease liability, adjusted for any lease prepayments or accruals, at the transition date.
Practical expedients
The following practical expedients have been applied at the IFRS 16 application date.
-- There has been no re-assessment of leases treated as finance leases under IAS 17 as at 30th April 2019.
-- A single discount rate has been applied for similar leases.
-- Long term leases, which expire within twelve months of the transition date, have been treated as short term leases, with no right-of-use asset and lease liability being calculated.
-- Initial direct costs have been excluded, when measuring the right-of-use asset at the transition date.
The reconciliation of lease liabilities is shown below
Unaudited GBP'000 Operating lease commitments at 30th April 2019 1,369 Impact of discounting minimum lease payments (63) Leases expiring before 30th April 2020 (44) Short-term leases (111) Low value leases (68) Other reconciling items (28) Additional lease liability at 1st May 2019 1,055 Finance lease liability at 30th April 2019 2,103 Total lease liability at 1st May 2019 3,158
The IFRS 16 impact on the statement of profit or loss for the six months to 31st October 2019 is as follows:
Unaudited GBP'000 Under IFRS 16 Operating profit 248 Financial expenses 27 Impact on profit before tax 275 Previously, under IAS 17 Reported as operating lease expenses within operating profit 267
The IFRS 16 impact on the balance sheet as at 31st October 2019 is as follows:
Unaudited Unaudited Unaudited IFRS 16 IFRS 16 adjustments IAS 17 GBP'000 GBP'000 GBP'000 Property, plant and equipment 63,481 10,017 73,498 Right-of-use assets 11,798 (11,798) - Lease liabilities (8,473) 1,789 (6,684) Impact on net assets 66,806 8 66,814 6. Operating Segments
Products and services from which reportable segments derive their revenues
In accordance with the requirements of IFRS 8 "Operating Segments" 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:
-- Mechanical Engineering - casting, machining and general engineering -- Refractory Engineering - powder manufacture and mineral processing
Information regarding the Group's operating segments is reported in the following tables.
Segment Revenue
Mechanical Engineering Refractory Engineering Sub Total Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Half Half Audited Half Half Audited Half Half Audited Year Year Year Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended Ended Ended Ended 31st 31st 30th 31st 31st 30th 31st 31st 30th October October April October October April October October April 2019 2018 2019 2019 2018 2019 2019 2018 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue External sales 47,244 45,052 82,375 22,846 22,496 44,671 70,090 67,548 127,046 Inter-segment sales 13,085 10,591 21,714 4,757 4,423 8,726 17,842 15,014 30,440 Total revenue 60,329 55,643 104,089 27,603 26,919 53,397 87,932 82,562 157,486 Reconciliation to consolidated revenues: Inter-segment sales (17,842) (15,014) (30,440) Consolidated revenue for the period 70,090 67,548 127,406
Segment profits
Mechanical Engineering Refractory Engineering Sub Total Unaudited Unaudited Unaudited Unaudited Half Half Audited Half Half Audited Unaudited Unaudited Year Year Year Year Year Year Half Year Half Year Audited Ended Ended Ended Ended Ended Ended Ended Ended Year Ended 31st 31st 30th 31st 31st 30th 31st October 31st October 30th April October October April October October April 2019 2018 2019 2019 2018 2019 2019 2018 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Profits Segment result including associates 5,419 4,541 11,932 3,446 4,854 8,070 8,865 9,395 20,002 Group administration costs (1,010) (765) (2,138) LTIP equity plan provision - (523) (1,220) Group finance expenses (449) (303) (234) Consolidated profit before tax for the period 7,406 7,804 16,410 Tax (1,812) (2,076) (3,963) Consolidated profit after tax for the period 5,594 5,728 12,447
Segment Assets and Liabilities
Segmental total assets Segmental total liabilities Segmental net assets Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Half Half Audited Half Half Audited Half Half Audited Year Year Year Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended Ended Ended Ended 31st 31st 30th 31st 31st 30th 31st 31(st) 30th October October April October October April October October April 2019 2018 2019 2019 2018 2019 2019 2018 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Mechanical Engineering 110,736 95,447 97,862 80,245 64,674 72,520 30,491 30,773 25,342 Refractory Engineering 44,191 40,207 43,950 23,125 19,859 25,541 21,066 20,348 18,409 Sub total reportable segment 154,927 135,654 141,812 103,370 84,533 98,061 51,557 51,121 43,751 Goodwin PLC (the Company) net assets 73,384 61,369 81,249 Elimination of Goodwin PLC investments (25,301) (20,960) (25,374) Goodwill 9,819 9,715 9,665 Consolidated total net assets 109,459 101,245 109,291 Segmental property, plant and equipment (PPE) capital expenditure Goodwin PLC 1,456 2,408 3,602 Mechanical Engineering 1,172 3,039 6,461 Refractory Engineering 259 225 616 2,887 5,672 10,679 7. Geographical segments Half Year Ended 31st October Half Year Ended 31st October 2019 2018 Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Revenue Operational Non-current PPE capital Revenue Operational Non-current PPE capital assets assets expenditure assets assets expenditure GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 UK 16,836 73,865 80,895 2,623 14,991 68,263 77,896 3,195 Rest of Europe 10,852 6,990 3,496 80 17,503 10,857 3,724 535 USA 6,787 - - - 2,138 - - - Pacific Basin 18,111 15,464 7,528 45 14,762 15,064 7,888 17 Rest of World 17,504 13,140 7,021 139 18,154 7,061 6,367 1,925 Total 70,090 109,459 98,940 2,887 67,548 101,245 95,875 5,672 Year Ended 30th April 2019 Audited Audited Audited Audited Revenue Operational Non-current PPE capital assets assets expenditure GBP'000 GBP'000 GBP'000 GBP'000 UK 27,934 74,780 80,300 6,044 Rest of Europe 24,205 7,035 3,605 2,300 USA 8,100 - - - Pacific Basin 28,956 14,779 6,855 84 Rest of World 37,851 12,697 6,944 2,251 Total 127,046 109,291 97,704 10,679 8. Revenue
The Group's revenue is derived from contracts with customers. The following tables provide an analysis of revenue by geographical market and by product line.
Mechanical Refractory Engineering Engineering Total GBP'000 GBP'000 GBP'000 Primary Geographical markets Unaudited half year ended 31st October 2019 UK 11,584 5,252 16,836 Rest of Europe 7,053 3,799 10,852 USA 6,735 52 6,787 Pacific Basin 6,988 11,123 18,111 Rest of World 14,884 2,620 17,504 Total 47,244 22,846 70,090 Mechanical Refractory Engineering Engineering Total GBP'000 GBP'000 GBP'000 Primary Geographical markets Unaudited half year ended 31st October 2018 UK 9,160 5,831 14,991 Rest of Europe 13,497 4,006 17,503 USA 2,097 41 2,138 Pacific Basin 6,570 8,192 14,762 Rest of World 13,728 4,426 18,154 Total 45,052 22,496 67,548 Product lines Unaudited half year ended 31st October 2019 Standard products and consumables 5,131 22,846 27,977 Minimum period contracts for goods and services 2,171 - 2,171 Bespoke engineered products - over time 25,146 - 25,146 Bespoke engineered products - point in time 14,796 - 14,796 Total 47,244 22,846 70,090 Unaudited half year ended 31st October 2018 Standard products and consumables 3,935 22,496 26,431 Minimum period contracts for goods and services 2,006 - 2,006 Bespoke engineered products - over time 12,441 - 12,441 Bespoke engineered products - point in time 26,670 - 26,670 Total 45,052 22,496 67,548 9. Dividends
The Directors do not propose the payment of an interim dividend.
Unaudited Unaudited Audited Half Year Half Year Year Ended to to 31st October 31st October 30th April 2019 2018 2019 GBP'000 GBP'000 GBP'000 Equity Dividends Paid: Ordinary dividends paid during the 6,927 - - period in respect of the year ended 30th April 2019 (96.21p per share) Ordinary dividends paid during the period in respect of the year ended 30th April 2018 (83.473p per share) - 6,010 6,010 Dividends paid to minority shareholders in Noreva GmbH - 64 116 Total dividends paid during the period 6,927 6,074 6,126 10. Earnings Per Share
The calculation of the basic earnings per ordinary share is based on the number of ordinary shares in issue. For all periods up to and including 30th April 2019 this amounted to 7,200,000 shares and with effect from the 16th October 2019 this has increased to 7,363,200 shares. The weighted average number of ordinary shares in issue during the six months ended 31st October 2019 was 7,213,304. The relevant profits attributable to ordinary shareholders were GBP5,260,000 (half year ended 31st October 2018: GBP5,393,000).
There is a share option scheme in place for the Directors of the Company under the Company's Equity 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 scheme, a maximum of 489,600 share options vested at 1st May 2019, of which 163,200 were exercised during the current period. The total number of shares used as the denominator for the diluted earnings per share is 7,538,727 (half year ended 31st October 2018: 7,344,000; year ended 30th April 2019: 7,688,056).
11. Capital Management, Issuance and Repayment of Debt
At 31st October 2019 the capital utilised was GBP132,217,000 as shown below:
Unaudited Unaudited Audited as at as at as at 31st October 31st October 30th April 2019 2018 2019 GBP'000 GBP'000 GBP'000 Cash and cash equivalents (9,416) (7,577) (9,640) Lease liabilities - finance leases (note 15) 6,684 2,539 2,103 Bank loans and committed facilities 26,390 13,088 19,434 Bank overdrafts 3,340 3,654 9,147 Deferred consideration 204 500 204 Net debt 27,202 12,204 21,248 Total equity attributable to equity holders of the parent 105,015 96,516 105,165 Capital 132,217 108,720 126,413 12. Property, Plant and Equipment Unaudited Unaudited as at as at 31st October 31st October 2019 2018 GBP'000 GBP'000 Net book value at the beginning of the period 74,106 69,154 Additions 2,887 5,672 Transfer to right-of-use assets - on transition (as required by IFRS 16) (3,959) - Transfer to right-of-use assets - finance lease (as required by IFRS 16) (6,134) - Disposals (at net book value) (77) (82) Depreciation (3,180) (2,764) Exchange adjustment (162) (267) Net book value at the end of the period 63,481 71,713
During October 2019, the Group took out a GBP5,000,000 seven year finance lease on two induction furnaces and a water quench facility, resulting in the equipment being transferred to the right-of-use assets category.
13. Right-of-use assets Unaudited as at 31st October 2019 Land and Plant and Plant and Total buildings equipment equipment - formerly - finance - formerly operating leases operating leases leases GBP'000 GBP'000 GBP'000 GBP'000 Balance recognised on transition 1,008 - 47 1,055 Transfer from property, plant and equipment - 3,959 - 3,959 Additions 929 77 - 1,006 Finance lease transfer - 6,134 - 6,134 Depreciation (232) (141) (16) (389) Exchange adjustment 43 (10) - 33 Net book value at the end of the period 1,748 10,019 31 11,798 14. Intangible assets Unaudited Unaudited as at as at 31st October 31st October 2019 2018 GBP'000 GBP'000 Net book value at the beginning of the period 22,354 21,138 Additions 535 701 Amortisation (484) (549) Exchange adjustment 78 18
Net book value at the end of the period 22,483 21,308 15. Lease liabilities Unaudited Unaudited Unaudited as at as at as at 31st October 31st October 31st October 2019 2019 2019 Finance leases Right-of-use Total leases GBP'000 GBP'000 GBP'000 Opening balance - IAS 17 2,103 - 2,103 Balance recognised on transition - 1,055 1,055 Additions 5,054 1,006 6,060 Interest expense 21 27 48 Repayment of lease liabilities (including interest) (518) (244) (762) Exchange adjustment 24 (55) (31) 6,684 1,789 8,473
16. Total Financial Assets and Financial Liabilities
The following table sets out the Group's accounting classification of its financial assets and financial liabilities, and their carrying amounts at 31st October 2019. The carrying amount is a reasonable approximation of fair value for all financial assets and financial liabilities.
Total carrying Fair value amount / - hedging Amortised fair value instruments FVTPL cost amount GBP'000 GBP'000 GBP'000 GBP'000 Financial assets measured at fair value Forward exchange contracts used for hedging 2,143 - - 2,143 Other forward exchange contracts - 104 - 104 2,143 104 - 2,247 Financial assets not measured at fair value Cash and cash equivalents - - 9,416 9,416 Contract assets - - 9,846 9,846 Trade receivables and other financial assets - - 24,981 24,981 - - 44,243 44,243 Financial liabilities measured at fair value Forward exchange contracts used for hedging 1,276 - - 1,276 Other forward exchange contracts - 276 - 276 Contingent consideration - 204 - 204 1,276 480 - 1,756 Financial liabilities not measured at fair value Bank overdrafts - - 3,340 3,340 Bank loans - - 26,390 26,390 Finance lease liabilities - - 8,473 8,473 Contract liabilities - - 27,068 27,068 Trade payables and other financial liabilities - - 18,174 18,174 - - 83,445 83,445
The forward exchange contract assets and liabilities fair values in the above table are derived using Level 2 inputs as defined by IFRS 7 as detailed in the paragraph below.
IFRS 7 requires that the classification of financial instruments at fair value be determined by reference to the source of inputs used to derive the fair value. This classification uses the following three-level hierarchy: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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